Addis Ababa University

School of Graduate Studies

MBA Program

Customers Perception of Service Quality in

Ethiopia banking sector: An Exploratory study

By:
Yonatan Gebre
Advisor:
Professor Tigineh Mersha
A project paper submitted to the school of graduate studies of
AAU in partial fulfilment of the requirements for the degree
of Masters of Business Administration [MBA]

June, 2010
Addis Ababa

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 Addis Ababa University
School of Graduate Studies
MBA Program

Customers Perception of Service Quality in Ethiopia banking

sector: An Exploratory study

By Yonatan Gebre

Approval Board Committee

________________________ ________

Chairman, Graduate Studies Signature

__________________ _________

Research Advisor Signature

__________________ _________

Examiner Signature
__________________ ________
Examiner Signature

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 Declaration
I, Yonatan Gebre declare that this work entitled : Customers Perception of

Service Quality in Ethiopia banking sector: An exploratory study, is

outcome of my own effort and study and that all sources of materials used for the study
have been duly acknowledged. I have produced it independently except for the guidance
and suggestion of the Research Advisor.

This study has not been submitted for any degree in this University or any other
University. It is offered for the partial fulfilment of the degree of MA in Business
Administration [MBA]

By Yonatan Gebre
Signature____________________________
Date_______________________________

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 ACKNOWLEDGEMENTS

First, I would like to express my special gratitude to to my advisor Professor Tigineh

Mersha for his countless suggestions, assistance and invaluable advice from the start to
the end of the study.
I would like also to thank staff member of CBE, AIB and UB for their support while
distributing and collecting the questionnaires.
I am greatly indebted to my mother, W/o Amina Eshete and my relatives who supported
and encouraged me to succeed in my academic endeavour.
Lastly but not the least, my warmest appreciation and thanks goes to all my friends for
their support and encouragement while doing this paper.

Thank you, all!

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 Table of Contents
Acknowledgments..............................................................................................................................i

Table of Contents...............................................................................................................................ii

List of Tables.....................................................................................................................................iv

List of Figures....................................................................................................................................v

Acronyms..........................................................................................................................................vi

Abstract............................................................................................................................................vii

Page

CHAPTER ONE:INTRODUCTION ..............................................................................1

1.1 Background of the study ...................................................................................................... 1

1.2 Banking history in Ethiopia ................................................................................................. 2

1.3 Statement of the Problem ..................................................................................................... 4

1.4 Objectives of the study ......................................................................................................... 5

1.5 Significance of the Study ...................................................................................................... 6

1.6 Scope of the study ................................................................................................................. 6

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 1.7 Limitation of the study ......................................................................................................... 6

1.8 Research Methodology ......................................................................................................... 7

1.9 Organization of the Paper .................................................................................................... 9

CHAPTER TWO: LITERATURE REVIEW ............................................................................. 10

2.1 Introduction ......................................................................................................................... 10

2.2 Definitions of Quality management ................................................................................. 10

2.3 Gurus of Quality Management ......................................................................................... 12

2.4 Quality management in manufactoring firms ................................................................ 14

2.5 Quality Management in Service firms.............................................................................. 15

2.5.1 Service Quality .............................................................................................................. 16

2.5.2 Underlying Principles of Service Quality ................................................................. 17

2.5.3 Meaning and types of service expectations .............................................................. 18

2.5.4 Factors that influence customers peception and expection.................................... 19

2.5.5 Measurement and dimensions of service quality .................................................... 21

2.6 What Managers can do to Improve Service Quality? .................................................... 25

2.7. Summary of Past research works on Quality Service ................................................... 32

CHAPTER THREE: DATA PRESENTATION, ANALYSIS AND INTERPRETATION ....35

3. Introduction ................................................................................................................................35

3.1 Commercial Bank of Ethiopia............................................................................................ 35

3.1. 1. Demographic Information of the Respondents...................................................... 36

3.1.2. Service Quality gap at CBE ........................................................................................ 39

3.2 Awash International Bank ................................................................................................. 43

3.2.1 Demographic Information of the Respondents........................................................ 43

3.2.2 Service Quality gap at AIB .......................................................................................... 44

3.3 United Bank S.C................................................................................................................... 47

3.3.1 Demographic information of Respondents .............................................................. 48

3.3.2. Service Quality gap at United Bank.......................................................................... 50

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 3.4 SERVQUAL Importance Ranking..................................................................................... 52

3.5. Comparative analysis of the three bank service quality............................................... 53

CHAPTER FOUR: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ............ 56

4.1. Summary of Major Findings............................................................................................. 56

4.2. Conclusions ......................................................................................................................... 58

4.3 Recommendations............................................................................................................... 59

References

Annex 1

Annex 2

List of tables

Page

Table 2.1 Gurus of Quality Management.........................................................................................

Table 2.2 dimensions of Quality for manufacturing and Service....................................................

Table 2.3 Summary of past studies on quality service.....................................................................

Table 3.1.1 A: Gender distribution of respondents at CBE..............................................................

Table 3.1.1 B: Respondents Educational level and gender at CBE..................................................

Table 3.1.1 C: Respondents service experience at CBE...................................................................

Table 3.1.2 SERVQUAL attributes score of Perception, Expectation and Gap at CBE...................

Table 3.2.1 A: Distribution of respondents service experience by gender at AIB..........................

Table 3.2.1 B: Respondents educational level and gender at AIB...................................................

Table 3.2.2 SERVQUAL attributes score of Perception, Expectation and Gap at AIB. ..................

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Table 3.3.1 A: Gender distribution of respondents at UB................................................................

Table 3.3.1 B: Respondents educational level at UB........................................................................

Table 3.3.1 C: Respondents service experience at UB.....................................................................

Table 3.3.2 SERVQUAL attributes score of Perception, Expectation and Gap at UB.....................

Table 3.4.1 SERVQUAL importance level of dimensions at CBE, AIB and UB with point score.....

Table 3.5.1 Comparisons on service quality gap at CBE, AIB and UB.................................

Table 3.5.2: Quality Service gap three banks with Standard deviation of the dimensions...

List of Figures

Page

Figure 1.1 SERVQUAL Model...............................................................................................

Figure 2.1 dual customer expectations.................................................................................

Figure 2.2 Service Quality Gaps............................................................................................

Figure 3.1.1 A: Respondents educational level by gender at CBE........................................

Figure 3.1.1 B: Respondents banking service by gender at CBE..........................................

Figure 3.3.1 Respondents educational level by gender at UB..............................................

Figure 3.3.2 Respondents banking service by gender at UB................................................

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Acronyms

AIB Awash International Bank

CBE Commercial Bank of Ethiopia

NBE: National Bank of Ethiopia

SERVQUAL Service Quality Measurement Tool

UB United Bank

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 Abstract
This exploratory study seeks to assess customers perception of service quality in the banking
sector in Ethiopia. Three banks (Commercial Bank of Ethiopia, Awash International Bank and
United Bank) included in the study. The SERVQUAL model was used to determine customers
perception of service quality at each of the three banks. The findings reveal that there the
customers expectations are not meet. Among the five dimensions of service quality Tangible and
Responsiveness have higher gap scores at CBE and AIB. The Reliability dimension shows a
negative gap score at all three banks showing that the customers do not perceive the banks
provides consistent service. Farther, the Empathy dimension has a higher negative gap at AIB and
UB suggesting that the banks need to train their staff on proper customers service techniques.
While ranking the five dimensions respondents rated Reliability as the most important service
quality indicator at the three banks. The study also indicates that the banks need to become more
responsive and assuring to their customers as well as increase their accessibility.

Key words: SERVQUAL, Quality in Ethiopia Banks, CBE, AIB, UB, Service Quality

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 CHAPTER ONE

Introduction
1.1 Background of the study
The Ethiopian government promulgated the Monetary and Banking proclamation No.83/1994 to
liberalize the financial sector through reforms by bestowed banking laws that encourage the entry
of private banks into the financial system in order to stimulate competition with the public banks
which significantly promoted the, the development of the banking sector is tremendous.
Accordingly, many private banks have already been established and their number is increasing
from year to year. Currently there are four (4) government, nine (9) private and around five(5) in
the process of formation. Due to this fact a fierce competition among banks has come to exist.
Hence, it is vital for banks to improve on their service quality. Provision of high quality of service
will result in higher customer satisfaction and enhance customer loyalty. Banks that excel in
quality service can have a distinct marketing edge since improved levels of service quality are
related to higher revenues, increased cross-sell ratios, and higher customer retention and expanded
market shares.

One of the determinants of success of a firm is how the customers perceive the resulting service
quality, as the perceived service quality is the key driver of perceived value (Collart, 2000). It is
the perceived value, which determines customer satisfaction. Many firms including banking
industries begin to track their customers satisfaction through measuring their level of service

11
quality perceived by their customers. Spreng and Olshavsky (1993) stated that customer
satisfaction or dissatisfaction is considered to be the result of a comparison between the pre-use
expectations that a customer has about the product or service and the post-use perception of
product or service performance. The most widely used model to measure perceived service quality
known as SERVQUAL was developed by Parasuraman et al. (1985, 1988).

1.2 Banking history in Ethiopia1

The establishment of banks in Ethiopia traces it origin to over 100 years. The agreement that was
reached in 1905 between Emperor Minelik II and Mr.Ma Gillivray, representative of the British
owned National Bank of Egypt, marked the introduction of modern banking in Ethiopia. Following
the agreement, the first bank called Bank of Abysinia was inaugurated on Feb.16, 1906 by the
Emperor. The Bank was totally managed by the Egyptian National Bank. (Sofia and Seid, 2005)
Within the first fifteen years of its operation, Bank of Abysinia opened branches in different areas
of the country. In 1906 a branch in Harar (Eastern Ethiopia) was opened at the same time of the
inauguration of Bank of Abysinia in Addis Ababa. Another at Dire Dawa was opened two years
later and at Gore in 1912 and at Dessie and Djibouti in 1920. Mac Gillivray, the then
representative and negotiator of Bank of Egypt, was appointed to be the governor of the new bank
and he was succeeded by H Goldie, Miles Backhouse, and CS Collier were in charge from 1919
until the Banks liquidation in 1931.

Bank of Abyssinia was legally replaced by Bank of Ethiopia shortly after Emperor Haile Selassie
came to power. The new Bank, Bank of Ethiopia, was a purely Ethiopian institution and was the
first indigenous bank in Africa and established by an official decree on August 29, 1931 with a
capital of 750,000. Bank of Egypt was willing to abandon its concessionary rights in return for a
payment of Pound Sterling 40,000. The transfer of ownership took place very smoothly and the
offices and personnel of the Bank of Abyssinia including its manager, Mr. Collier, were retained
by the new Bank. (Giday B.1987:68-71).

1 This section discussion is taken form National Bank of Ethiopia Website-http://www.nbe.gov.et/History/history.htm.

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The National Bank of Ethiopia with more power and duties started its operation in January 1964.
Following the incorporation as a share company on December 16, 1963 as per proclamation
No.207/1955 of October 1963, Commercial Bank of Ethiopia took over the commercial banking
activities of the former State Bank of Ethiopia. It started operation on January 1,1964 with a
capital of Eth. Birr 20 million. In the new Commercial Bank of Ethiopia, in contrast with the
former State Bank of Ethiopia, all employees were Ethiopians.

There were two other banks in operation namely Banco di Roma S. and Banco di Napoli S.C. that
later reapplied for license according to the new proclamation each having a paid-up capital of Eth.
Birr 2 million.

The first privately owned bank, Addis Ababa Bank Share Company, was established by Ethiopians
initiative and started operation in 1964 with a capital of Birr 2 million in association with National
and Grindlay Bank, London which had 40 percent of the total share. In 1968, the original capital of
the Bank rose to 5.0 million and until it ceased operation, it had 300 staff at 26 branches.

Following the declaration of socialism in 1974 the government extended its control over the whole
economy and nationalized all large corporations. Organizational setups were taken in order to
create stronger institutions by merging those that perform similar functions. Accordingly, the three
private owned banks, Addis Ababa Bank, Banco di Roma and Banco di Napoli were Merged in
1976 to form the second largest Bank in Ethiopia called Addis Bank with a capital of Eth. birr 20
million and had a staff of 480 and 34 branches. Before the merger, the foreign participation of
these banks was first nationalized in early 1975.

Proclamation No.99 of 1976 brought into existence the Agricultural and Industrial Bank, which
was formed in 1970 with a 100 percent state ownership, was brought under the umbrella of the
National Bank of Ethiopia. Then it was reestablished by proclamation No. 158 of 1979 as a public
finance agency possessing judicial personality and named Agricultural and Industrial Development
Bank (AIDB). It was entrusted with the financing of the economic development of the agricultural,
industrial and other sectors of the national economy extending credits of medium and long-term
nature as well as short-term agricultural production loans. (Belai Giday,1987).

Monetary and Banking proclamation No.83/1994 and the Licensing and Supervision of Banking
Business No.84/1994 laid down the legal basis for investment in the banking sector. Consequently

13
shortly after the proclamation the first private bank, Awash International Bank was established in
1994 and Dashen Bank was established on September 20,1995 as a share company with an
authorized and subscribed capital of Birr 50.0 million. Afterward, currently there are four(4)
government, nine(9) private and around five(5) in the process of inauguration. Even though there
is such a move in flourishing of private banks and branch expansion, Ethiopia remains one of the
under-banked economies even by the standard of Sub-Saharan African countries.

1.3 Statement of the Problem

The unique characteristics of service contribute to the complexities involved in assessing and
managing service quality. Since Quality can be several things at the same time and may have
various meanings, depending on the person. This complicates both the consumers assessment of
service quality and the providers ability to control it. Most services involve a direct contact
between the customers and the service provider (Mersha and Abdlakha, 1990). This means that, in
addition to task proficiency, interpersonal skills like courtesy, friendliness, tolerance and
pleasantness are important dimensions of quality, particularly in high contact service where front-
line employees are the key to customer satisfactions (Mersha and Abdlakha, 1990). The customer
is the judge of quality. Understanding customer needs, both current and future, and keeping pace
with changing markets requires effective strategies for listening to and learning from customers,
measuring their satisfaction relative to competitors, and building relationships, customer needs
particularly differences among key customer groups must be linked closely to an organizations
strategic planning, product design, process improvement, and workforce training activities.
Satisfaction and dissatisfaction information are important because understanding them leads to the
right improvements that can create satisfied customers who reward the company with loyalty,
repeat business, and positive referrals. Creating satisfied customers includes prompt and effective
response and solutions to their needs and desires as well as building and maintaining good
relationships.
A business can achieve success only by understanding and fulfilling the needs of customers. From
a total quality perspective, all strategic decisions a company makes are customer-driven. In other
words, the company must show constant sensitivity to emerging customer and market
requirements. According to the study by Collart (2000), one of the determinants of success of a

14
firm is how the customers perceive the resulting service quality, as this is the key driver of
perceived value. It is the perceived value which determines customer satisfaction. Many firms
including banking industries begin to track their customers satisfaction through measuring their
level of service quality perceived by their customers. The most widely used model to measure
perceived service quality was developed by Parasuraman et al. (1985, 1988) known as
SERVQUAL. According to this model, five dimensions of service quality are: Tangibles,
Reliability, Responsiveness, Assurance and Empathy. (A detailed discussion of the SERVQUAL
model is done in the literature review section of this paper.)

However, the model developed in the context of one country may not be applicable in other
countries as the institutional, economic and socio-cultural factors may different from region to
region or from one sector to another within the same region.
In Ethiopia, many customers voice concerns about inefficiency and lack of quality excellence in
the banking sector. However, there are inadequate published studies which demonstrate if indeed
the quality of banking service in Ethiopia is poor. This study aims to examine the gap between
customers expectations and perceptions of banking service in Ethiopia using the SERVQUAL
model. The banks included at this study are Commercial Bank of Ethiopia, Awash International
Bank and United Bank. The following research questions are formulated.
1. Do Ethiopian Banks provide the service that their customers expect? And do they track
customers satisfaction?
2. How do customers expect and perceive the quality of banking service in Ethiopia at their
respective bank?
3. What kind of gap exists between customers expectations and perceptions at their
respective banks?
4. How are the five service quality dimensions ranked by bank customers in Ethiopia?
This paper examines these issues based a survey conducted in the three major Ethiopian banks:
CBE, AIB and UB.

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1.4 Objectives of the study
The general objective of this exploratory study is to assess the customers perception toward
quality of service in the banking sector and the dimensions of service quality in the level of their
importance for good quality. More specifically the study seeks:

1. To measure customers expectation of each of the five dimensions of service quality using
SERVQUAL instrument.

2. To measure customers perception of each of the five dimensions of service quality using
SERVQUAL instrument.

3. To determine the gap in customers perceptions and expectations in each of the five
dimensions of service quality for the three banks.

4. To assess the level of importance ranked to each of the five dimensions of service quality
by Ethiopian banks customers.

1.5 Significance of the Study

This paper will provide some insight about customers perception of service quality in
Ethiopian banking sector.

The paper can also be used as a feedback for operation managers of the banks that
considered in the study regarding the perceptions of their customers toward their service
quality.

It can be a good indicator for managers to identify the gap between managements
perception of service quality and that of their customers and taking actions to close the
gaps.

1.6 Scope of the study

The scope of this study is to focus on customers perception toward service quality at selected
branches of CBE, AIB and UB. Thus, the study examines banking service quality only from
customers perspective. The branches considered in the study are: Temenja yaji, Arada Giorgis and
Addis ketema from CBE, Head office branch, Aratkilo branch, and Hayahulet branch from AIB
and Mesrake branch, Bole Medhehanialem branch and Bonbetera branch from UB.

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1.7 Limitation of the study
As stated earlier this is an exploratory study that is limited in scope and sample size, but it can
contribute to further study on quality of the banking sector in Ethiopia. Thus the findings of this
study may not give a general picture of the quality of the banking sector in Ethiopia. In addition
the researcher was planning to conduct the study by including Dashen bank as one of the banks to
be studied, due to the fact it is assumed to be the leader in Ethiopians banking sector. However,
unwillingness of Dashens management, forced the researcher to consider another bank.

The researcher also faced financial limitation to conduct comprehensive and detail study of service
quality in Ethiopia banking sector by taking large sample.

1.8 Research Methodology

1. Introduction

This is an exploratory study with a primary purpose of assessing customers perception toward
quality banking service at CBE, UB bank and AIB. Data collection is done via a survey method
where SERVQUAL instrument is used to record opinions of respondents about the quality of
service they receive in their respective bank. In this study the original SERVQUAL model of
Parasuraman et al. (1985), (five dimensions, namely Tangibility, Reliability, Responsiveness,
Assurance, and Empathy) is used. (Appendix 1).

This instrument which consisted of 22 statements is modified by adding one more statement on the
Tangible dimension (the convenience location of branches to customers). This is due to the fact
that convenience is one of major concern for bank customers particularly in Ethiopian context.
According to Kumar et al., 2009, perception of service convenience may affect customers
overall evaluation of the service, including satisfaction with the service and perceived service
quality and fairness. Therefore, this study is based on the modified SERVQUAL model which is
assumed to contain the five dimensions with 23 statements to assess the gap between customers
expectations and perceptions. The respondents are asked to rate all 23 statements each on
expectation and as well as perception and to rate the relative importance of each of the five

17
dimensions constituting the SERVQUAL scale. Farther the original SERVQUAL question was
translated form English to Amharic (Appendix 2). This was necessary since many of bank
customers do not understand English.

The questionnaire comprised three Parts; Part one contains demographic questions. Part two has
questions related to respondents expectation of service quality and perception of the services of
banks based on their actual experience using the five dimensions of service quality, and the third
Part has questions related to level of importance of the five dimensions- Tangibility, Reliability,
Responsiveness, Assurance, and Empathy. (See Appendix 1& 2).

2. Selection of the targeted banks

Commercial Bank of Ethiopia is the pioneer in the banking industry of Ethiopia and has around
206 branches in Ethiopia and has 50 branches in the capital city, Addis Ababa. AIB is also the first
privet bank after the new proclamation for introduction of privet banks, with a better banking
experience in Ethiopia. United Bank is also assumed to be one of the leading banks in Ethiopia
banking industry. Based on these facts the researcher has selected these three banks.

3. Sampling Technique

The target samples for the study is all the bank customers regardless of whether they are doing
their banking transactions with domestic banks, foreign banks, loan service or other banking
services at the selected branches. Since, it is difficult to get the exact number of customers in the
banks and the limited scope of the study, 45 customers from each bank are selected as a sample
which is a total of 135 respondents. From each banks three braches 15 respondents are randomly
selected at the working hours of the bank.

4. Data Collection Procedure

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The study largely depends on primary data, which is collected through survey method by using
SERVQUAL instrument. The respondents are asked to rate each statement using Likert scales of 1
to 7 (1 strongly disagree, 7 strongly agree). The respondents are also asked to rank the five
dimensions according to how important it is to them, on a 1-10 point scale, while determining the
quality of a service. The secondary data are collected from internet; government agencies and the
NBE are used to support the primary data analysis.

5. Data Analysis Procedure

The mean and standard deviation of each SERVQUAL statement will be calculated for perception
as well as expectation and the average Gap Score for each dimension is obtained. This is done by
deducting the mean score expectation for each attributes from the mean score of perception i.e.
(E-P). The average dimension SERVQUAL scores (for all five dimensions) is divided by five to
obtain the unweighted score of service quality .The necessary analysis and interpretation is made
based on the average unweighted gap score of each bank as well as the average gap scores for
attributes and dimensions. Finally the five dimensions are ranked by the respondents on the level
of importance for determining the quality of banking service. In this study an improvised system of
SERVQUAL instrument is used to calculate the average unweighted gap scores and ranking the
five dimensions in the level of their importance.

1.9 Organization of the Paper

The paper is organized into four chapters. The first chapter deals with introductory part consisting
of introduction/background of the study, banking history in Ethiopia, statement of the problem,
theoretical framework, objectives of the study, methodology, scope and limitation of the study,
significance of the study.
The second chapter reviews literatures related to the study. In this chapter various theoretical
concepts that relates with service quality and its measurement and dimension of service quality and
issues related with quality service will be discussed.
Analysis of collected data, interpretation of the analyzed data is presented in the third chapter. And
finally, the fourth chapter presents summaries of major findings, the conclusions and the possible
recommendations.

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 CHAPTER TWO

LITERATURE REVIEW
2.1 Introduction
The primary purpose of this chapter is to get the theoretical understanding of the concept of
Quality management. And more specifically, customers expectations and perceptions toward
service quality and measurement of service quality. First, it will discuss the definitions given by
different scholars on the term quality management in both manufacturing and service firms.
Second, the literature review examined studies on development and Gurus of quality management
and the quality concept. Third, the review identified and discussed the customers perception and
expectation on quality service and determents of perceived customers quality. Fourth, the review
of the literature has tried to assess the model to measure service quality, SERVQUAL (Gap
analysis=P-E). Finally, guidelines to be followed by managers to improve service quality and
summarized outcomes study done on service quality..

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2.2 Definitions of Quality management2
Quality is one of the five key objectives of operations along side with cost, flexibility, material
management and delivery. While quality management is cross-functional in nature and involves
the entire organization, operation has a special responsibility to produce a quality product for the
customer. This requires the cooperation of the entire organization, the operation manager has a
special responsibility to produce a quality product or deliver a quality service for its customers.
(Schlroeder, 2006).

The definition of quality depends on the role of the people defining it. Most consumers have a
difficult time defining quality, but they know it when they see it. Since quality can be several
things at the same time and may have various meanings, according to the person, the measures
applied and the context within which it is considered. The difficulty in defining quality exists
regardless of product, and this is true for both manufacturing and service organizations.
There is no single universal definition of quality. Some people view quality as performance to
standards.Others view it as meeting the customers needs or satisfying the customer. Lets
look at some of the more common definitions of quality.

Quality is the search for excellence

The search for excellence is inbred in a Darwinian philosophy for the survival of the fittest.
Quality is thus an expression of this excellence, which leads one firms product to dominate
another, and to guarantee its survival by image of quality. Over time, excellence creates an image
and quality. (Tapiero, 1996).

Quality is in the eye of the beholder

Heizer and Render(2002), demonstrated that quality is the ability of a product or service to meet
customer needs, or quality may be in the eyes of the beholder, but to create a goods or a service,
operation managers must defined what the beholder (the customer) expects. Thus, the
characteristics that connote quality must first be defined through research (user based approach to
quality). Then the characteristics will be translated to specific attributes of a product (product
based approach of quality). Then, the manufacturing process is organized to ensure that products

2 rd
The above discussion is made Roger G. Schlroeder 2006 Operation Management, Contemporary Concepts and Case 3 ed.,
th
p.136 and Chase, Aquilano and Jacobs, 1998, Production and Operation Management: Manufacturing and Service 8 ed pp.139.

21
are made precisely to specification (a manufacturing based approach to quality). A process that
ignores any one of these steps will not result in a quality product.

Conformance to specifications
Here quality is defined in terms of how well a product or service meets the targets and tolerances
determined by its designers. Conformance to specifications measures how well the product or
service meets the targets and tolerances determined by its designers. For example, the dimensions
of a machine part may be specified by its design engineers as 3.05 inches. This would mean that
the target dimension is 3 inches but the dimensions can vary between 2.95 and 3.05 inches.
Similarly, the wait for hotel room service may be specified as 20 minutes, but there may be an
acceptable delay of an additional 10 minutes. As these examples illustrate, conformance to
specification is directly measurable, though it may not be directly related to the consumers idea of
quality. (Chase et. al, 1998).

Value for price paid

Quality defined in terms of product or service usefulness for the price paid. is a definition of
quality that consumers often use for product or service usefulness. This is the only definition that
combines economics with consumer criteria; it assumes that the definition of quality is price
sensitive. (Chase et al, 2002).

Moreover, G. Schlroeder, (2006) point out a more comprehensive definition of Quality can be
formulated by defining quality from four dimensions: Quality of Design, Quality of Conformance,
the Abilities and Field service.
Thus, whether the product is a serivce or good, quality can be defined by, Quality of
design(determining specifcation before the product is produced), Quality of conformance (means
prodcuing a product to meet the specifications), Ability: availability, relibity, and maintainability
are another dimenstions of quality, and Field service,the last dimenstion, represents warranty and
repair or replacement of the product after it has been sold.(Schlroeder,2006)

22
Accordingly quality management can be defined as ,all management activities and functions
involved in determination of quality policy and its implementation through means such as quality
planning and quality Assurance (including quality control)
(www.businessdictionary.com/defination/quality-policy)

TOTAL QUALITY MANAGEMENT3

Total quality management (TQM) is different from the old concept of quality because its focus is
on serving customers, identifying the causes of quality problems, and building quality into the
production process. According to Heizer and Render(2006) TQM stress a commitment by
management to have a continuing company wide drive toward execellence in all aspects of
products and service that are important to the coustomer. Heizer and Render(2006) have also
developed seven concepts for effective Quality Improvement (QI) program by modifiying the 14
points developemd by Deming as follow: (1) Continuous Improvement, (2) Six Sigma, (3)
Employee empowerment, (4) Benchmarking, (5) Just-in-Time, (6) Taguchi comcept, and (7)
Knowledge of TQM.

2.3 Gurus of Quality Management4

The concept of quality has existed for many years, though its meaning has changed and evolved
over time. In the early twentieth century, quality management meant inspecting products to ensure
that they met specifications. In the 1940s, during World War II, quality became more statistical in
nature. Statistical sampling techniques were used to evaluate quality, and quality control charts
were used to monitor the production process. In the 1960s, with the help of so-called quality
gurus, the concept took on a broader meaning. Quality began to be viewed as something that
encompassed the entire organization, not only the production process. Since all functions were
responsible for product quality and all shared the costs of poor quality, quality was seen as a
concept that affected the entire organization.
Quality gurus have put forth several approaches to improve company performance. These
approaches are embodied in a set of quality management practices, known as total quality

3 th
The discussion at this section is taken from Heizer J.& Render B.(2006). Principle of Operation Management 6 ed., p.198-199
4
This presentation is taken from Chase, Aquilano and Jacobs, Production and Operation Management: Manufacturing and
th
Service 8 ed pp.141

23
management (TQM). Total Quality Management is a philosophy that involves each and every
individual in an organization in a continual effort to improve quality and achieve customer
satisfaction. The following table depicts leaders in the field of Quality Management.

LEADR Philosohpy/Contruibution Leaders

W.Edward Deming Deming insisted management accept responsibility for

building good system. The empolyees cannot produce
products that on average exceed the quality of what the
procee is caplabelof producing. He also made 14 points
for implementing quality improvement.

Joseph M. Juran A pioeer in teaching the Japanese how to impove

quality, Juran belives strongly in top-management
commitment, support, and involvement in the quality
effort. He is also a beliver in teams that continually seek
to raise quality standards. Juran varies form Deming
somewhat in focusing on the customer and defining
quality as fitness for use, not necessarily the written
specifications.

Armand Feigenbaum His 1961 book,Total quality control, laid out 40 steps to
quality improvement processes. He viewed quality not
as a set of tools but as a total field that integrated the
processes of a company. His work in how people learn
from each others successes led to the field of corss-
functional teamwork.

Philip B. Crosby Quality is free was Crosbys attention-getting book

published in 1979. Crosby believed that in the traditional
trade-off between cost of improving quality and and the
cost of poor qualtiy, the cost of proor quality is
understated. Crosby coined the term zero defects and
stated, there is absolutely no reason for having errror or
defects in amy product or service

Table 2.1 Gurus of Quality Management: Adapted from Heizer and Brender
Principle of Operation Management p.196. Leaders in the field of Quality management:

24
2.4 Quality management in manufactoring firms5
In recent years organizations are increasingly recognizing the strategic importance of quality and
quality management. Many organizations have arrived at the conclusion that effective quality
management can enhance their competitive abilities and provide strategic advantages in the
marketplace. This belief has led many organization, on the part of many, both large and small,
manufacturing and service, profit and non-profit, to shape and evolve their approaches to quality
management by taking quality as strategic weapon to organizational success.

Manufacturing quality, unlike the general concept of qulity ,as defined above, is well dfined in
terms of attributes which are assocated to and required by a manufacturing porcess to operate
fauttlesly. In this, sense quality is a charaterstics and a requirement of the industrial apparatus.
Management of operations and quality control are the means used to produce and control quality
in manufacturing. There may be several dimensions along which such manaufacturing quality may
be defined, incuding (Trapiero,1996)

A. The propensity to maintain the manufacturing process in control, i.e. operating according to
agreed on standards of manufacture.
B. The propensity of the manufacturing porcess to produce itmes or products faultlessly.
C. The propensity to maintain( and or reduce) the manufacturing process variability, i.e limit
process instabilities by maintainging the process repetitivity.

The following table dipicts the basic differnce between products at manufactoring and sevice
giving firms with regard quality and its managment:

Manufacturing Organizations Service Organizations

Conformance to specifications Tangible factors
Performance Consistency
Reliability Responsiveness to customer needs
Features Courtesy/friendliness

5The above presentation is made based the discussion by Trapiero C. (1996), On definition of quality ,The management of
Quality and its control, pp.6-8

25
 Durability Timeliness/promptness
Serviceability Atmosphere
Table 2.2 dimensions of Quality for manufacturing and Service

2.5 QUALITY MANAGEMENT IN SERVICE FIRMS6

The Origins of Service Quality Theory: The Disconfirmation Paradigm

The foundation of service quality theory lies in the product quality and customer satisfaction
literature. Early conceptualizations (e.g., Gronroos 1982, 1984; Parasuraman, Zeithaml, and 1985)
are based on the disconfirmation paradigm employed in the physical goods literature. This suggest
that quality results form a comparisons of perceived with expected performance as is reflected in
Gronrooss(1982,1984) as cited by Brady and Cronin(2001), similar conceptualization of service
quality that puts the perceived service against the expected service (Gronroos 1984,p.37,
emphasis in original.) As cited by Brady and Cronin(2001), In addition to adapting the
disconfirmation paradigm to the measurement of service quality, Gronroos (1982) identifies two
service quality dimensions i.e., Functional quality and Technical quality. Functional quality
represents how the service is delivered; that is, it defines customers' perceptions of the interactions
that take place during service delivery. Technical quality reflects the outcome of the service act, or
what the customer receives in the service encounter. (Brady and Cronin,2001)

The disconfirmation paradigm also is the basis for Parasuraman et al (1985) SERVQUAL model,
which views service quality as the gap between the expected level of service and customer
perceptions of the level received. Parasuraman et al (1988) propose five dimensions of service
quality: the reliability, Responsiveness, Assurances, Empathy, and tangibility characteristics of the
service experience.

Rust and Oliver (1994) offer a three-component model: the service product (i.e. technical
quality), the service delivery (i.e. functional quality, and the service environment. (Barady and
Cronin, 2001)

6
This section is based on an article by Brady M.K, & J. Cronin, Some New Thoughts on Conceptualizing Perceived Service Quality:
A Hierarchical Approach , The Journal of Marketing, Vol. 65 No.3, 2001 pp.34-49.

26
2.5.1 Service Quality7

Practitioners and writers in the popular press tend to use the term satisfaction and quality
interchangeably, but researchers have attempted to be more precise abut meanings and
measurement of the two concepts, resulting in considerable debate. Although they have something
in common, satisfaction is generally viewed as a broader concept; whereas service quality focuses
specifically on dimensions of service. Based on this view, perceived service quality is a component
of customer satisfaction. Service quality, which is the main issue in this paper, is a focused
evaluation that reflects the customers perception of elements of service such as interaction quality,
physical environment quality, and outcome quality. These elements are in turn evaluated based on
the specific service quality dimensions: reliability, Assurance, Responsiveness, Empathy and
Tangibles. Satisfaction, on the other hand, is more inclusive: it influenced by perception of service
quality, product quality, and price as well as situational factors and personal factors. (Zeithaml and
Bitner, 2004).

Quality defined from the customer's viewpoint. The increasingly important role played by services
and the inability of researchers to apply traditional manufacturing definitions to service quality led
to a new conceptualization of service quality. Only one definition of quality was judged to be
appropriate by service scholars (Gronroos, 1983; Parasuraman et al., 1985), and that definition was
governed by the extent to which a service met the expectations of customers. "Only customers
judge quality; all other judgments are essentially irrelevant" (Zeithaml et al., 1990). Service
quality affects customer satisfaction. A popular definition of service quality proposed by et al.
(1988) is conformance to customer specificationsthat is, it is the customers definition of
quality that matters, not that of management.

In the marketplace, quality must ultimately be evaluated from the customer's perspective.
Customers can articulate how well a product and/or service meets their expectations, a perceptual
judgment they cannot make about how well the product and/or service conforms to specifications.
Defining quality as the extent to which a product and/or service meets and/or exceeds expectations
allows managers and researchers to include subjective factors (i.e., courtesy, helpfulness,

7
This section discussion is highly influenced by the work of Zelthmal A.& Bitner M.(2006),Service Marketing -Integrating
Customer Focus Across the firmspp.85-87

27
confidence, appearance) that are critical to customers' judgments but difficult to quantify into
assessments of quality. ( Reeves and Bednar, 1994 )

Thus, Service quality can be defined as the collective effect of service performances which
determine the degree of satisfaction of a user of the service. In other words, quality is the
customers perception of a delivered service. By service-quality management, we refer to the
monitoring and maintenance of end-to-end services for specific customers or classes of customers.

2.5.2 Underlying Principles of Service Quality

According to Clow and Kurtz(2003), Receiving a high level of service is important to consumers
but understanding how to evaluate the service quality received is more difficult. Two consumers
receiving what appears to be the exact same service e form a company may evaluate the quality of
the service differently. One consumer may feel the service was good while the other may feel the
service was performed poorly. When discussing service quality the three underlying principles that
should be kept in mind are:

1. Service quality is more difficult for the consumer to evaluate that quality of a good.
2. Service quality is based on consumers perception of the outcome of the service and their
evaluation of the process by which the service was performed.
3. Service quality perceptions result form a comparison of what the consumer expected prior
to the service and the perceive level of service received.

The process used by consumers in evaluating service differs from the process used for goods.
Services tend to be high in experience and credence qualities while goods tend to be high in search
qualities. Search qualities are attributes that contributes that consumers can evaluate only during or
after the consumption process. Credence qualities are attributes that consumers have difficulty
evaluating even after consumption is complete. Experience qualities are qualities of a good or
service that will be evaluated only after the service has been consumed or during the process of
consumption. (Clow and Kurtz, 2003)

28
2.5.3 Meaning and types of service expectations8
To say that expectations are reference points against which service delivery is compared is only a
beginning. The level of expectation can vary widely depending on the reference point the customer
holds. Although most everyone has an intuitive sense of what expectation are, service marketers
need a far more through and clear definition of expectations in order to comprehend, measure, and
manage them.

Because the idea of customer expectations is so critical to evaluation of service quality, we start
our discussion by talking about the levels of expectations.

Expected service: levels of expectations

Customers hold different types of expectation about service. The highest can be termed desired
service: the level the customer hopes to receive- the wished for level of performance.

Desired service: - is a blend of what the customer believes can be and should be. The
expectation reflects the hopes and wishes of these consumers;. For example, you will engage the
services of your colleges placement office when you are ready to graduate. without these hopes
and wishes and the belief that they may be fulfilled they would probably not go to this service
What are your expectations of the service? In all likelihood you want the office to find you a job
the right job-in the right place for the right salary because that is what you hope and wish for.

However, you probably also see that the economy may constrain the availability of ideal job
openings in companies. And not all companies you may be interested in have a relationship with
your placement office. In this situation and in general, customers hope to achieve their service
desires but recognize that this is not always possible. We call the threshold level of acceptable
service adequate service-the level of service the customer will accept. In the economic
slowdown, many college graduates trained for high-skilled jobs may accepted entry-level positions
at any office or internships for no pay. Their hopes and desires were still high, but they recognized
that they could not attain those desires in the market that existed at the time. Their standard of
adequate service was lower than their desired service. Adequate service level represents the

8
This sections discussion is based on Zeithamal and Bitner (2004),Service Marketing -Integrating Customer Focus Across the firm 3rd ed. Tata
MacGraw-Hill p. 61-74

29
minimum tolerable expectation the bottom level of performance acceptable to the customer. (
Zeithamal and Bitner 2004)

Figure 2.1 shows these two expectation standard as the upper and lower boundaries for customer
expectations. This figure portrays the idea that customers asses service performance on the basis of
two standard boundaries: what they desire and what they deem acceptable. The adequate service
expectation level, on the hand, may vary for different firms within a categories or subcategory.

Figure 2.1 dual customer expectations adopted from Clow and Kurtz Service marketing p.58

The Zone of Tolerance

Zone of Tolerance is extent to which customers recognize and are willing to accept this variation is
called the zone of tolerance and is shown in figure 3.If service drops below adequate service the
minimum level considered will be undermined. If service performance is higher than the zone of
tolerance at the top end where performance exceeds desired service customers will be very pleased
and probably quite surprised as well. ( Zeithamal and Bitner 2004

Different customers posses different zones of tolerance

Another aspect of variability in the range of reasonable services is that different customers possess
different tolerance zones. Some customers have narrow zones of tolerance, requiring a tighter
range of service from providers, whereas other customers allow a greater range of service. For
example, very busy customers would likely always be pressed for time, desire short wait times in
general, and also hold a constrained range for the length of acceptable wait times. When it comes
to meeting plumbers or repair personnel at their homes for appliance problems, customers who
work outside the home have a more restricted window of acceptable time duration for that
appointment than do customers who work in their homes or do not work at all.

30
In summary, we can express the boundaries of customer expectation of service with two different
levels of expectations: desired service and adequate service. The desired service level is less
subject to change than the adequate service level. A zone of tolerance separates these two levels.
This zone of tolerance varies across customers and expands or contracts with the same customer.
Customer expectations are uncontrollable.( Zeithamal and Bitner 2004)

2.5.4 Factors that influence customers peception and expection9

Because expectations play such a critical role in customer evaluation of services, marketers needs
to have a control over these factors as well, but many of the forces that influence customer
expectation are uncontrollable.

When consumers are interested in purchasing service, they are likely to seek or take in information
from several different sources. For example, they may call a store, ask a friend, or deliberately
track newspaper advertisements to find the needed service at the lowest price. They may also
receive service information by watching television or hearing an unsolicited comment from a
colleague about a service that was performed well. In addition to these active and passive types of
external search for information, consumers may conduct an internal search by reviewing the
information held in memory about the service. Those factors that determine customers perception
and expectation of quality service are:

A. Explicit service promises

B. Implicit service promises,

C. Word-of-mouth communications, and

D. Past experience.

A. Explicit service promises:- are personal and non-personal statement about the service
made by the organization to customers. The statements are personal when they are

9 Ibid

31
 communicated by salespeople or service or repair personnel; they are non personal When
they come from advertising, brochures, and other written publications. Explicit service
promises are one of the few influences on expectations that are completely the control of
the service provider.

Promising exactly they will ultimately be delivered would seem a logical and appropriate way to
manage customer expectations and ensure that reality first the promises. All types of explicit
service promises have a direct effect on desired service expectation. If the sales visit portray a
banking service that is available 24 hours a day, customers desires for that service (as well as the
service of competitors) will shaped by this promise. Explicit service promises influence the level
of both desired service and prediction service. (Zeithamal and Bitner 2004)

B. Implicit service promises: - are service-related cues other than explicit promises the lead
to inferences about what the service should and will be like. These quality cues are
dominated by price and the Tangibles associated with the service. In general, the higher the
price and the more impressive the Tangibles, the more a customers will expect from the
service.

C. Word-of-mouth communication:- The importance of word-of-mouth communication in

shaping expectations of service is well documented. These personal and sometimes non-
personal statements made by parties other than the organization convey to customers what
the service will be like and influence both predicted and desired service. Word of mouth
tends to be very important in services that are difficult to evaluate before purchase and
direct experience of them. Experts (including consumer reports, friends, and family) are
also word-of-mouth sources that can affect the levels of desired and predicted service.

D. Past experience: - Past experience, the customers previous exposure to service that is
relevant to the focal service, is another force in shaping predictions and desires. The service
relevant for prediction can be previous exposure to the focal firms service. For example,
you probably compare each stay in a particular hotel with all previous stay in that hotel. (
Zeithamal and Bitner 2004)

32
2.5.5 Measurement and dimensions of service Quality
Manufacturing quality measurment can largely be objective and standardized while many servie
measurments are perceputal or subjective. Parasuraman et al. (1985,1988) argued that the
customers perception of service quality offering is a function of five dimensions categorized as
reliability, Assurance, Tangibles, Empathy, and Responsiveness and suggested SERVQUAL (a
service quality measurement tool).

Cronin and Taylor (1992) argued for Performance only measurement of service quality and
proposed a service quality measurement tool called SERVPERF. Parasuramans SERVQUAL
model is widely used to measure perceived service quality. Parasuraman et al. (1985) also found
that the customers perception of service quality depends upon the size and direction of the gap
between the service the customer expects to receive and what he or she perceive to have been
received. Thus, service quality is defined as the gap between customers expectation of service and
their perception of the service experience. The gap theory is the method for calculating the service
quality that involves subtracting a customers perceived level of service received form what was
expected. (Clow and Kurtz, 2003). This gap model is one of the best-received and most
heuristically valuable contributions to the service literature according to Brown and Bond (1995).
The five dimensions of service quality are: tangibility, reliability, Responsiveness, Assurance and
Empathy..

The SERVQUAL gaps can be calculated at three levels which are, the overall (unweighted) gap
score, average gap scores for each dimension and gap scores for each attributes (Check appendix 1
to see how the calculation can be done)

SERVQUAL Gap score = i =1

(PAi EAi )
[n]

Where, P= Perception score,

E= Expectation score,

Ai= Attribute number and

n= it can be number of respondents/ attributes in a dimension/dimensions depending on the level of

gap to be measured.

33
 External Factors influencing
expectation

Tangibles
Expected Service
Reliability
Perceived Service
Responsiveness
Quality
Assurance
Perceived
Empathy Service

Figure2.2: the SERVQUAL Model: adopted from the Journal of Marketing, A. A. Parasuraman et al. A
conceptual Model of Service Quality and Its Implication for Future Research 1985/49 p.48

Definitions of the SERVQUAL Dimensions

1. Tangibles: the appearance of the companys physical facilities, equipment, and personnel.
If a restaurant, for example, is dirty, not presentable and the employees are disheveled
looking the tangible quality will be low.
2. Reliability: The ability of the company to perform the promised service dependably and
accurately without errors. For example, if a restaurant takes a reservation for 7:00pm and
you are not seated promptly or they bring the wrong meal, the Reliability will be low. Note
that Reliability for service (which is more accurately called conformance) is defined
differently than Reliability for manufacturing.
3. Responsiveness: the willingness of the company to provide service the prompt and helpful
to the customer. In the restaurant, for example, the meal should be provided in a timely
fashion and with help when needed to understand the menu.
4. Assurance: The knowledge and courtesy of the companys employees and their ability to
convey trust and confidence.

34
 5. Empathy: The caring, individualized attention the company provides to its customers.10

As discussed above, these dimensions of service are very different form manufacturing and reflect
the close interaction that the employees have with the customer in service delivery.
Some researchers have used SERVQUAL entirely to investigate bank service while others have
chosen to use a smaller number of attributes to represent each of the five dimensions. According to
Brown and Bond (1995), their GAP model is one of the best received and most heuristically
valuable contributions to the service literature.
The pioneer study of Parasuraman et al. (1985) has been a major driving force in developing an
increased understanding of and knowledge about service quality
They defined service quality as the gap between customers expectation of service and their
perception of the service experience. The various gaps visualized in gap model are:
(1) Gap 1: Difference between consumers expectation and managements perceptions of those
expectations, i.e. not knowing what consumers expect.
(2) Gap 2: Difference between managements perceptions of consumers expectations and service
quality specifications, i.e. improper service-quality standards.
(3) Gap 3: Difference between service quality specifications and service actually delivered i.e. the
service performance gap.
(4) Gap 4: Difference between service delivery and the communications to consumers about
service delivery, i.e. whether promises match delivery.
(5) Gap 5: Difference between consumers expectation and perceived service. This gap depends
on size and direction of the four gaps associated with the delivery of service quality on the
marketers side. (Kumar and Charles, 2009).

The full conceptual model shown in figure 2.3 conveys a clear message to managers wishing to
improve the quality service: the key to close the customers gap is to close provider gap 1 through 4
and keep them closed. To the extent that one or more of provider gaps 1 through 4 exist, customers
perceive service quality shortfalls. The model, called the gap model of service quality, serve as the

10
This discussion is made based on G. Schroeder, (2007) Operation Management, Contemporary Concepts and Case (3rd ed.)
McGraw-Hill/Irwin p.140)

35
framework for service organization improve quality service and services marketing. (Zeithamal
and Bitner 2004:539)

Figure 2.2 Service Quality Gaps adopted form Parasuraman et al A conceptual Model of Service Quality
and Its Implication for Future Research 1985 p.44

2.6 What Managers can do to Improve Service Quality?11

Delivering excellent service is a winning strategy. Quality service sustains customers' confidence
and is essential for a competitive advantage of any company. Yet many companies are struggling
to improve service, wasting money on ill-conceived service programs and undermining credibility
with management rhetoric not backed up with action. Are there guidelines to help managers chart a

11
The discussion at this section is highly influenced by LL. Berry et al(1994), Improving Service Quality in America:
Lessons Learned [and Executive Commentary] The Academy of Management Executive Vol. 8, No. 2 (May, 1994), pp.
32- 52

36
service-improvement strategy for their organizations? Yes, this section will discuss ten guidelines
that can be implemented to the service quality improvement program. (Berry et al, 1994)

1. Listening to Customers.

Quality is defined by the customer. Conformance to company specifications is not quality;

conformance to the customer's specifications is. Spending wisely to improve service comes from
continuous learning about the expectations and perceptions of customers and noncustomers.
Customer research reveals the strengths and weaknesses of a company's service from the
perspective of those who have experienced it. Noncustomer research reveals how competitors
perform on service and provides a basis for comparison. Important expectations for the service that
competitors fulfill better offer an agenda for action. Companies need to install an ongoing service
research process that provides timely, relevant trend data that managers become accustomed to
using in decision making. Companies need to build a service quality information system, not just
do a study. Conducting a service quality study is analogous to taking a snapshot. Deeper insight
and a sense for the pattern of change come from a continuing series of snapshots taken from many
angles. (Berry et al, 1994)

2. Reliability
Reliability is the ability of the company to perform the promised service dependably and
accurately without errors (Schroeder, 2007). Also Reliability is the core of quality service. Little
else matters to customers when a service is unreliable. When a firm makes frequent mistakes in
delivery, when it doesn't keep its promises, customers lose confidence in the firm's ability to do
what it promises dependably and accurately. Friendliness from the staff and sincere apologies do
not compensate for unreliable service. Although most customers appreciate an apology, the
apology does not erase the memory of that service. If a pattern of service failure develops,
customers conclude the firm cannot be counted on, friendly and apologetic or not. (Barry et al,
1994)

37
 3. Basic Service
In addition to Reliability, service customers want the basics-they expect fundamentals, not
fanciness; performance, not empty promises. The services delivery should at least be above their
acceptable services. Basic services are the minimum requirements a service provides should
deliver to meet the customers desired service level. (Berry et al, 1994)

4. Service Design
Reliably delivering the basic service customers expect depends in part on how well various
elements function together in a service system. These elements include the people who perform the
specific services in the service chain, the equipment that supports these performances, and the
physical environment in which the services are performed. Design flaws in any part of a service
system can reduce quality. It is tempting to blame poor quality on the people delivering service but
frequently the real culprit is poor service system design.
Service mapping is one way to improve service system design. A service map is a visual definition
of a service system, displaying each sub-process in the system in the sequence in which it appears.
In effect, the service map depicts the chronology and pattern of performances that make up a
service. If drawn explicitly, it answers the questions: "What is the service?" and "How does it
work?" (Berry et al, 1994)

5. Recovery
Service encounters are moment of truth or interaction between a customer or potential customers
and an organization (Zelthmal et al., 2006). While these moments of interaction provide an
opportunity for firms to satisfy and even to delight the customers, there likewise is an opportunity
to disappoint the customer. This happens when customers perception of initial service delivery
behaviour falling below the customers expectation, or Zone of tolerance
(Zelthmal et al., 2006). The impact of active recovery strategies on a companys revenue and
profitability is dramatic (Bamford & Xystouri,2005). Service recovery involves the actions taken
by an organization in response to a service failure presenting another and perhaps even more
critical moment of truth, in which the company can not only satisfy and retain its customers, but it
can even delight them with its effort. In this sense service recovery involves a wider set of
activities than mere complaint handling (Holloway et al., 2009). In such cases, the consumer may

38
be unable or unwilling to complain, the service personnel may acknowledge the failure before the
customer initiates (Zelthmal et al., 2006).
Many dissatisfied customers do not complain directly to the company-to avoid a confrontation, or
because they perceive no convenient way to complain, or do not believe complaining will do much
good. Companies can overcome some of this reluctance and improve recovery service in three
ways:

A. Encourage customers to complain and make it easy for them to do so. Managers who
wish to improve problem-resolution service must overcome the common customer
perception that companies don't really care when things go wrong. Many firms rely
exclusively on reactive recovery strategies in which customers must initiate contact.
Comment cards available in the service facility and toll-free telephone numbers are
examples of reactive systems. These approaches are useful but they preclude customers
unwilling to take the first step. Thus, proactive strategies, in which the company makes the
first contact, should be considered.

B. Respond quickly and personally. Companies often take too long to respond to unhappy
customers, and then respond impersonally. By responding quickly, a firm conveys a sense
of urgency. Quick response demonstrates that the customer's concern is the company's
concern. By responding personally, with a telephone call or a visit, the firm creates an
opportunity for dialogue with the customer-an opportunity to listen, ask questions, explain,
apologize, and provide an appropriate remedy.
C. Develop a problem resolution system. Service employees need specific training on how to
deal with angry customers and how to help customers solve service problems. In some
cases, they need access to information systems that will tell them more about the customer,
the situation causing the problem, and possible solutions. (Berry et al, 1994)

6. Surprising Customers.
Customers judge the dimensions of Responsiveness, Assurance, Empathy and Tangibles during the
service delivery process; hence, these are process dimensions (A., Zelthmal et al., 2006). Reliability,
judged following the service, is an outcome dimension. Although Reliabilityis the most important
dimension in meeting customers' service expectations, the process dimensions-especially

39
Assurance, Responsiveness, and Empathy-are most important in exceeding them. Companies are
supposed to be reliable; they are supposed to provide the service they promise to provide. Thus, it
is difficult for firms to exceed customers' expectations by being reliable. The process dimensions
of service, however, provide the opportunity to surprise customers with uncommon swiftness,
grace, courtesy, competence, commitment, or understanding. The opportunity is present to go
beyond what is expected. In effect, exceeding customers' expectations requires the element of
surprise, and the best opportunity for surprising customers is when service providers and
customers interact. (Berry et al, 1994)

7. Fair Play
Customers expect service companies to treat them fairly and become resentful and mistrustful
when they perceive otherwise. Fairness underlies all the customers' expectations. Customers expect
service companies to keep their promises (reliability), to offer honest communication materials and
clean, comfortable facilities (Tangibles), to provide prompt service (Responsiveness), to be
competent and courteous (Assurance), and to provide caring, individualized attention (Empathy).
Fairness is not a separate dimension of service but, rather, touches the very essence of what
customers expect.
The intangibility of services heightens customers' sensitivity to fairness issues. Because services
are performances rather than objects, they are difficult for customers to evaluate prior to purchase.
Customers cannot try on services for fit and feel; there are no tires to kick such as in buying an
automobile. Customers usually must buy the service to actually experience it. Thus, they must trust
a service company to deliver on its promises and conduct itself honourably. (Berry et al, 1994)

8. Team work
Teamwork is often seen in the academic literature as a means of supporting willingness ot deliver
service quality (Berry and Parasuraman, 1992). Having many customers to serve, like on a full
airline flight or in a busy bank office, can be mentally and physically exhausting. Control over the
service is often dispersed among different organizational units that function without cooperation,
frustrating contact employees' ability to effectively serve their customers. It is common for
employees to be so stressed by the service role that they become less caring, less sensitive, and less
eager to please. The presence of service "teammates" is an important dynamic in sustaining
servers' motivation to serve. Thus, effective team work tends to develop capabilities for delivering

40
a high level of service quality (Ueno, 2008) Coworkers who support each other and achieve
together can be an antidote to service burnout. Team involvement can be rejuvenating,
inspirational, and fun.

9. Employees Research
Employee research is as important to service improvement as customer research, for three reasons.
First, employees are themselves customers of internal service, and thus are the only people who
can assess internal service quality. Because internal service quality affects external service quality,
measuring internal service quality is essential. Second, employees can offer insight into conditions
that reduce service quality in the organization. Employees experience the company's service
delivery system day after day. They see more than customers see and they see it from a different
angle. Employee research helps reveal why service problems occur, and what companies might do
to solve these problems.8 Third, employee research serves as an early-warning system. Because of
employees' more intensive exposure to the service delivery system, they often see the system
breaking down before customers do. (Berry et al, 1994)

10. Management Commitment/Servant Leadership

Delivering excellent service requires a special form of leadership/management commitment which
is also referred as "servant leadership" by Parasuraman et al, (1994). According to the authors,
Servant leaders serve the servers, inspiring and enabling them to achieve. Such leaders
fundamentally believe in the capacity of people to achieve, viewing their own role as setting a
direction and a standard of excellence, and giving people the tools and freedom to perform their
task. Empowerment of front-line staff could be fundamental to achieving and improving the level
of service quality. Nevertheless, empowerment of front-line staff has both positive and negative
outcomes (Ueno, 2008). But still it is possible to achieve a high level of service quality form
medium degree of empowerment.
The ten guidelines discussed above are not mutually exclusive and that they must be viewed in a
holistic manner. In figure 2.3 service qualities ring to capture these interrelationships. Listening is
positioned on the outer ring because listening has an impact on all the other lessons. Identifying the
basics of service, improving service system design, recovering from service shortfalls-these and

41
other essentials of service quality involve listening behaviour. Reliability is pictured in the centre,
because Reliability is the core of service quality. Little else matters to customers when the service
is unreliable. The sequence of the lessons is purposeful. The service system should be designed to
deliver the basic service excellently. Recovery service usually provides an opportunity to surprise
customers and to demonstrate fair play. Teamwork, employee research, and servant leadership are
critical factors in an organization's emotional readiness to deliver quality service. (Berry et al, 1994

Figure 2.3 Service Quality Ring adopted from L.L Berry et al (1994),Improving Service Quality
in America: Lessons Learned [and Executive Commentary] The Academy of Management
Executive Vol. 8, No. 2 (May, 1994), pp. 32- 52

42
2.7. Summary of Past research works on Quality Service (in Banks and related areas)

43
44
45
 CHAPTER THREE

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

3. Introduction
The primary focus of this study is to assess the customers perception toward quality banking
services at selected three branches of Commercial Bank of Ethiopia, Awash International Bank
and United Bank, in Addis Ababa. Out of 135 questionnaires distributed to customers 115 (85%)
complete responses were returned from the three banks. The presentation, analysis and
interpretation of the questionnaire for the three banks will be done for CBE, AIB and UB
respectively. And finally a summarized analysis is done to compare the three banks with regard to
the quality of their banking service. The first part of the questionnaire consists of demographic
information of the respondents are presented at subsequent tables and diagrams for each bank. The
second part of the questionnaire presents the average score for each of the 23 Expectation
statements, and then the score for each of the 23 Perception statements this information is used to
calculate the Gap Score for each of the statements where the Gap Score = Perception
Expectation. The last part of the questionnaire deals with importance ranking of the five
dimensions of service quality. It is determined by obtaining the average score of a rating scale with
a maximum of 10 point for each SERVQUAL dimension. In this analyses SPSS v.17.0 and excel
spreadsheets are used to make the necessary calculations.

3.1 Commercial Bank of Ethiopia.

The commercial Bank of Ethiopia was incorporated as a share company on December 16, 1963 per
proclamation no 207-1955 to take over the commercial banking activities of the former state Bank
of Ethiopia. Under this name, it began operation on January 1, 1964, with a capital of Ethiopian
Birr 20,000,000 and served for about 16 years. The bank was wholly owned by the state and
operated as an autonomous institution under the commercial code of Ethiopia. Under the socialist
regime in Ethiopia (1974-1991).

The Commercial Bank of Ethiopia Share Company and Addis Bank had identical objectives power
and duties. Hence, the socialist regime saw it necessary to merge them in order to eliminate the
duplication of efforts and bring them under a centralized banking structure; consequently, the

46
present day commercial Bank of Ethiopia was established under proclamation No.184 of Augest2,
1980. (Giday B. 1987).

VISION

To become a world-class commercial bank.

MISSION
We are committed to maximizing shareholder value through enhanced financial
intermediation and unparalleled customer satisfaction. We deploy highly
motivated, skilled and disciplined employees capable of providing banking
products and services that meet international best practices and standards. We
strongly believe that Reliability and public confidence are the bases of our success.

VALUES:

We stand for quality;

We are a learning organization;

We are committed to unparalleled customer satisfaction;

Our employees are our valuable assets;

We are committed to maximizing shareholder value;

We uphold transparency, accountability and professionalism;

We are an equal-opportunity employer; and

We are corporate citizens.

47
3.1. 1. Demographic Information of the Respondents
Forty five (45) questionnaire were distributed to three branches of CBE namely, Temenja yaji,
Arada Giorgis and Addis ketema branches with 15 questionnaires in each branches. A total of 40
questionnaires were returned i.e. 88.8% of the total distributed questionnaires used for the analysis.
Table 3.1.1 A: depicts the gender distribution of the respondents. Accordingly about 12.5% of the
respondents are females and the rest are males (87.5%). This shows that majority of the
respondents are male.

Respondents Gender distribution

Sex Frequency %
Female 5 12.5
Male 35 87.5
Total 40 100.0

Table 3.1.1 A: Gender distribution of the respondents

As can be observed from Table 3.1.1.B below, 6 respondents (17.5%) have completed grade 12th,
8(20%) are college diploma holder, whereas 19(47.5%) respondents are first degree holders and
6(15%) have masters and above. This indicates that most of the banks customers are educated and
have a good understanding of quality banking service.

Respondents educational level gender

Respondents sex
Respondents
educational level Female Male Total

12th Complete 1 6 7(17.5%)

Diploma 1 7 8(20%)
Degree 2 17 19(47.5%)
Masters and above 1 5 6(15%)
Total 5 35 40(100%)

Table 3.1.1 B: Respondents educational level and gender

48
Figure 3.1.1 A: Educational level of Respondents by Gender

In order to understand the Customers experience with the banking service the responses collected
and presented figure 3.1.1.B. It can be noted that 21 (52.5%) of the respondents have used the bank
for more than 5 years and 12 (30%) & 7 (17.5%) have used the branch between 1 to five years, and
less than one year respectively. Thus from the above data is can be seen that the respondents have
a good experience in using the bank.

Table 3.1.1 C: Respondents service experience at CBE

customer service experience

Year No %
0-1 year 7 17.5
1-5 years 12 30.0
above 5 years 21 52.5
Total 40 100.0

49
Figure 3.1.1 B: Respondents banking service experience by gender.

3.1.2. Service Quality gap at CBE

The overall SERVQUAL score is the result of average perception score minus the average
expectation score derived from the SERVQUAL instruments. Table 3.1.2 shows the service quality
gap on each individual item under respective dimensions for CBE. When we take a closer look at
the individual items, it is found that the individual statements under each dimension have a
negative service quality gap implying that the overall expectation of banks service quality at CBE
falls short of expectations.

Accordingly the average unweighted score of CBE is 0.8387 (Table 3.1.2). All the five
dimensions recorded a negative service quality gap. This indicates the banks service cannot meet
customers expectation.

Tangible has a gap score of -0.798 (Table 3.1.2). Among all the attribute the convenience of the
location of branches has comparatively high gap score of -1.2 (Table 3.1.2). However the bank has
a relatively low gap in relation to modern looking equipments and Materials associated with the
service are visually appealing with a score of -0.5 and -0.52 respectively showing the appearance
of the banks physical facilities and equipment, although not good, are perceived to be better than
the other dimensions.

The dimension, Reliabilityhas a score of -0.91 (Table 3.1.2) which indicates that the branches fail
to meet customers expectation on this dimension. A bank, ideally, should provide its service as
promised. But the gap score for this attribute is -1.117 (Table 3.1.2) indicating that the costumers
do not have a faith (confidence) in the service promised by the bank. But the attribute Sincere

50
interest in solving customers problems has a very low score gap of -0.33 (Table 3.1.2) which
shows a positive side of the banks staff to solve the customers problem. This can be associated
with the BPR implementation of the bank.

Responsiveness has a gap score of -0.965(Table 3.1.2). With regard to this dimension Staff are
never too busy to respond to customers request. have a gap score of -1.73. demonstrating the
banks staff are not able to provide prompt service to customers and are too busy to respond to
customers request especially at peak hours. Assurance is another service quality dimension with an
average gap score of -0.733(Table 3.1.2).
The friendliness and courtesy of staff attribute has score of -1.5 (Table 3.1.2). Customers expect
banks staff to be polite and friendly with customers but that is not the case at CBE to some extent.
Attributes like: Behaviors of staff install confidence in customers and Customers feel safe in
their transactions have a score of -0.68 and -0.580 (Table 3.1.2) Also Staff having knowledge to
answer your request has a gap score of -0.62 (Table 3.1.2). These scores support that while the
banks staff have a failed to convey trust and confidence in the customers and also not answer
customers request fully, these are not as bad as some other elements.

The last dimension Empathy has average gap score of -0.789 (Table 3.1.2) indicating the banks
deficiency at this dimension. Specifically, understanding the specific needs of customers attribute
has a gap score of -1.15, which shows the bank doesnt consider the specific need of customers and
individual attention.

51
 Table 3.1.2: SERVQUAL attributes score of Perception, Expectation and Gap at CBE

Commercial Bank of Ethiopia

SERVQUAL
Dimensions Q Attributes Perception Expectation Gap
Tangibility 1 Modern looking equipment 5.25 5.75 -.500
2 Visually Appealing physical facilities 5.07 5.9 -.830
3 Neat appearance of staff 5.38 6.32 -.940
Materials associated with the service are visually 5.08 5.6 -.520
4 appealing
5 Convenience Location of Branches 5.15 6.35 -1.200
Average score of dimension 5.186 5.984 -0.798
Reliability 6 Staff keeping promise 5 6.45 -1.450
7 Sincere interest in solving customers problems 5.32 5.65 -.330
8 Staff performing service right the first time 4.73 5.8 -1.070
9 Provide services at the time they promise to do so 5.08 6.25 -1.170
10 Insists on error free records 5.4 5.93 -.530
Average score of dimension 5.106 6.016 -0.91
Staff telling customers exactly when services will be 5.3 5.78 -.480
Responsiveness 11 performed
12 Prompt service to Customers 5.25 6.2 -.950
13 Staff willingness to help 5.2 5.9 -.700
Staff are never be too busy to respond to customers 5.27 7 -1.73
14 requests.
Average score of dimension 5.255 6.22 -0.965
Assurance 15 Behaviors of staff instill confidence in customers 5.4 6.08 -.680
16 Customers feel safe in their transactions 4.9 5.48 -.580
17 Friendliness and courtesy of staff 5.3 5.93 -1.05
18 Staff having knowledge to answer questions 5.03 5.65 -.620
Average score of dimension 5.3025 5.785 -0.733
Empathy 19 Individual attention given by staff 5.38 5.93 -.550
20 Convenient operating hours 5.13 6.03 -.900
21 Staff giving customers personal attention 5.07 5.75 -.680
22 Staff giving customers best interest at heart 4.97 5.63 -.660
23 Understand the specific needs of customers 4.93 6.08 -1.150
Average score of dimension 5.096 5.884 -0.788
Unweighted Average SERVQUAL score-0.8387

52
The unweighted SERVQUAL gap has a negative score of 0.8387 (Table 3.1.2). Also Table 3.1.2
depicts the summarized SERVQUAL gap score for the five dimensions where, the largest service
quality gap is found for the dimension Responsiveness with the gap score of -0.965 followed by
Reliability-0.965. However, the other three dimensions have more or less similar quality gap still
indicating there is a negative gap between customers expectation and perception of CBE banking
service quality.

All the above analysis for the five dimensions indicates that the customers perceptions fall short
of their expectations. In other words, the levels of service quality that the customers receive are
lower than their minimum tolerable expectation, i.e. there is a certain degree of dissatisfaction
among customers.

53
3.2 Awash International Bank
Awash international Bank (AIB) was established as the first private commercial bank (post 1991) on
November 10, 1994 by 486 founder shareholders with a paid up capital of Birr 24.2 million and
started banking operations on February 13, 1995. Over a period of years, the earnings per share, the
number of branches and types of service provided by the bank increased. Currently the bank has
more than 53 branches all around Ethiopia, (www.awashbank.com).

Vision:

To be the most preferred Bank of the people

Mission:

To provide efficient, competitive, diversified and profitable banking services to a continuously

growing number of customers in a socially responsible manner supported by Appropriate modern
banking technology as well as qualified , trained and motivated team of management and
employees imbued with high professional and ethical standards

3.2.1 Demographic Information of the Respondents

Forty five (45) questionnaires were distributed to three branches of AIB namely, Head office branch,
Aratkilo branch, and Hayahulet branch with 15 questionnaires in each branch of which.37
questionnaires (82.22%) are returned for analysis.
Table 3.2.1A depicts the experience of the respondents with the banks service and their gender
distribution. Accordingly about 40.5% of the respondents are female and the rest are male and 57%
of the respondents have banking relationship with AIB branch not less than five years while 43. % of
them has more than five years of banking experience. This shows that the respondents have adequate
experience for judging the banks service.

54
Table 3.2.1 A: Respondents service experience and gender at AIB

Customer
service
experience Respondents Gender
Female Male Total
0-1 year 2 2 4(10.81%)
1-5 year 7 10 17(45.24%)
above 5 years 6 10 16(43.95%)
15(40.54%) 22(59.46%) 37(100%)

Table 3.2.1 B show the educational background of respondents by gender. Among the respondents
about 45.59% have diploma, 16.2% have completed 12th grade, 27% are degree holders and 10%
have masters and above. Therefore, from the above data, one can infer that the respondent have a
good educational background to evaluate banking service quality.

Table 3.2.1 B: Respondents educational level and Gender

Respondents
educational level Respondents Gender

Female Male Total

12th complete 4 2 6(16.2%)
Diploma 7 10 17(45.59%)
BA 3 7 10(27%)
masters and above 1 3 4(10.08%)
Total 15 22 37(100%)

3.2.2 Service Quality gap at AIB

The original five dimensions: Tangibles, Reliability, Responsiveness, Assurance and Empathy with
additional item at Tangibles (.i.e. Convenience) that consists of 23 statements were taken from the
SERVQUAL model developed by Parasuraman et al, (1985). Table 3.2.2 depicted the service quality
gap score on individual items under each dimension. The SERVQUAL unweighted score has a
negative value of -0.8656. All of the five dimensions showed a negative service quality gap which
indicates a shortfall the overall perception of customers on service quality fell short of expectation.

55
While discussing the gap related to each specific dimension, Tangibles has a gap score of -
1.276(Table 3.2.2), Among all the attributes convenience of location of branches has the
comparatively higher negative gap score of -1.43(Table 3.2.2) indicating that the banks branches are
not at easy access to the customers. Also the other attributes in Tangible are having a gap score of
more than -1 showing customers expectations are not being met. Therefore the bank should strive
for improvement of these attributes.

With regard to Reliability the dimension the bank has a score of -0.982 which indicates some
problem to the bank since the customers perceived the bank to be low on reliability. The attribute
Provide services at the time they promise to do so has the largest negative score of -1.3among the
Reliability dimension (Table 3.2.2). Form this one can infer that the customers do not have a faith in
the service promised by the bank.

Responsiveness is the third dimension in the SERVQUAL model. At AIB the gap score of this
dimension is -0.9725 (Table 3.2.2). The attribute staff willing to help customers has the largest
negative gap value of -1.3 (Table 3.2.2) among all the attributes in this dimension indicating that the
banks staff may not show willingness to help customers.

Assurance as a dimension of service quality at AIB has a gap score of -.0795(Table 3.2.2). The staff
having knowledge to answer questions attribute has the largest negative gap score among the
attributes in this dimension i.e. -1.02 (Table 3.2.2) which shows the staff are not able to answer all
customers questions. The other attributes have a relatively lower value and more specifically
customers feel safe in their transactions attribute indicates that customers are less concerned with
safety of their transactions.

The average gap score for Empathy dimension is -1.284(Table 3.2.2). All the attributes in this
dimension has a high negative gap score showing the behavior of staff in this dimension is low.
Theoretically all banks staff are expected to be highly professional since Empathy is a cornerstone
in service marketing. But that is not the case at AIB according to this study.

Finally if a comparison is made among the five dimensions, the largest service quality gap is found
for the Tangibles (-1.43) dimension. Empathy and Reliability also have a gap score of -1.284 and -
0.982, respectively also indicating that the bank should also strive to improve these dimensions.
Identifying any existing service quality gaps will help the banks sector to develop necessary

56
 strategies to narrow and close them. Therefore, the above discussions portray that the banking
service of AIB does not provide a banking service desired by the customers.

Table 3.2.2: SERVQUAL attributes score of Perception, Expectation and Gap at AIB

SERVQUAL
Dimensions Q Attributes Perception Expectation Gap
Tangibility 1 Modern looking equipment 4.43 6.03 -1.6
2 Visually Appealing physical facilities 4.65 5.81 -1.16
3 Neat appearance of staff 4.78 5.97 -1.19
Materials associated with the service are visually 4.54 5.54
4 appealing -1
5 Convenience Location of Branches 4.49 5.92 -1.43
Average score of dimension 4.578 5.854 -1.276
Reliability 6 Staff keeping promise 4.57 5.43 -0.86
7 Sincere interest in solving customers problems 4.68 5.27 -0.59
8 Staff performing service right the first time 3.95 5.22 -1.27
9 Provide services at the time they promise to do so 4.54 5.84 -1.3
10 Insists on error free records 4.89 5.78 -0.89
Average score of dimension 4.526 5.508 -0.982
Staff telling customers exactly when services will be 4.97 5.78
Responsiveness 11 performed -0.81
12 Prompt service to Customers 4.81 5.62 -0.81
13 Staff willingness to help 4.51 5.81 -1.3
14 Never be too busy to respond to customers requests. 4.84 5.81 -0.97
Average score of dimension 4.7825 5.755 -0.9725
Assurance 15 Behaviors of staff install confidence in customers 5.03 5.92 -0.89
16 Customers feel safe in their transactions 5.27 5.78 -0.51
17 Friendliness and courtesy of staff 4.78 5.54 -0.76
18 Staff having knowledge to answer questions 4.76 5.78 -1.02
Average score of dimension 4.96 5.755 -0.795
Empathy 19 Individual attention given by staff 4.38 5.81 -1.43
20 Convenient operating hours 4.62 5.68 -1.06
21 Staff giving customers personal attention 4.46 5.59 -1.13
22 Staff giving customers best interest at heart 4.41 5.86 -1.45
23 Understand the specific needs of customers 4.35 5.7 -1.35
Average score of dimension 4.444 5.728 -1.284
Unweighted Average SERVQUAL score -0.8656

57
3.3 United Bank S.C
United Bank was incorporated as a Share Company on 10 September 1998 in accordance with the
Commercial Code of Ethiopia of 1960 and the Licensing and Supervision of Banking Business
Proclamation No. 84/1994. The Bank obtained a banking services license from the National Bank of
Ethiopia and is registered with the Trade, Industry and Tourism Bureau of the Addis Ababa City
Administration. Over the years United Bank built itself into a progressive and modern banking
institution, endowed with a strong financial structure and strong management, as well as a large and
ever-increasing customer base and correspondent banks. At the end of June 2008, United Bank
reported a return on equity of 29.51%. Today, United Bank is a full service Bank that offers its
customers a full range of commercial banking services with a network that includes 40 branches.

United Banks priority in the coming years is to strengthen its capital base, maximizing return on
equity and benefit from the latest technology in order to keep abreast with the latest developments
in the local and international financial services industry.

The vision of United Bank is to be "The Preferred Bank" in the banking industry of Ethiopia.

Mission

UBs mission is to render Quality Commercial Banking Services to the best satisfaction of its
Customers; to enhance Shareholder value; to be one of, if not the best, employers in the industry;
and, to discharge its corporate responsibilities to both the community in which it operates and the
environment which it shares with the world.

Value Statement

The customer is United Bank's lifeline

United Bank invests in its employees and dignifies them
United Bank is committed to quality
United Bank is a responsible corporate citizen
United Bank works towards profitability and growth.
United Bank values honesty, integrity and loyalty
United Bank lives its values (http//:www.hibretbank.com)

58
3.3.1 Demographic information of Respondents
Forty five (45) questionnaires were distributed to three branches of UB namely, Mesrake branch,
Bole Medhehanialem branch and Bonbetera branch 15 questionnaires to each branch. And a total of
38 (84.4%) complete questionnaires were returned for analysis.

Of the 38 respondents 30 (78.9%) are male and the remaining 8(21.1%) are female. This indicates
that majority of the respondents in this study are male shown on Table 3.3.1.A.

Table 3.3.1 A. Gender distribution of respondents at UB

Gender No. Percentage

Female 8 21.1
Male 30 78.9

Total 38 100

Regarding the educational level of the respondents, as it is showed in Table 4.3.1 B table and figure
4.3.1 below, 44% are 1st degree holders, 39.47% have diploma, 7.89% have completed 12th grade
and 7.89% have masters and above are only. From the above data we can infer that the customers of
UB have a good educational background to evaluate the quality of bank services.

Table 3.3.1 B. Respondents educational level at UB

Educational level No. Percentage

12th complete 3 7.89
Diploma 15 39.47
1st degree 17 44.75
Master and above 3 7.89
Total 38 100

59
Figure 3.3.1 Respondents educational level and gender

With regarding the respondents banking relationship with UB 60.52% of them have a banking
relationship between one and five years, 23.68% and 15.78% of them have more than five year and less
than one year of banking experience, respectively. Also figure 3.3.2 depicts the respondents banking
experience by gender. From the above facts we can infer that customers at UB have a good banking
experience to judge the banking service quality.

Table 3.3.1 C: Customers Service Experience at UB

Year No Percentage
0-1 year 6 15.78
1-5 year 23 60.52
5 years and above 9 23.68
Total 38 100

Figure 3.3.2 Customers banking service experience and gender distribution

60
3.3.2. Service Quality gap at United Bank
The gap analysis for UB is conducted based on the same procedure used for the above two banks by
using a SERVQUAL instrument. Table3.3.2 shows that all the values are negative indicating that the
bank fail to meet customers overall expectations. While discussing each dimensions separately
Tangibles has an average gap score of -0.864 (Table3.3.2). Attribute Materials associated with the
service are visually appealing has the largest negative gap -1.62 (Table3.3.2) showing the materials
are not visually appealing.

Reliability dimension has an average gap score of -1.048 (Table3.3.2). This illustrates customers do
not perceive the banks service to be consistent. More specifically the attribute Provide services at
the time they promise to do so has a gap score of -1.82 demonstrating the bank fails to meet its
explicit or implicit service promise. Also Staff performing service right the first time and Sincere
interest in solving customers problems have a negative score of -1.48 and -1.05 respectively which
shows that according to this study the banks Reliability in general is in doubt.

Responsiveness has an average gap score of -0.7276(Table3.3.2). All the attributes in this dimension
have a low gap score except the attribute Never too busy to respond to customers requests which
has a score of -1.46 showing a deficiency at this attribute. The average gap score of Assurance
dimension is -0.475(Table3.3.2). Attributes under this dimension have relatively low gap scores
supporting that the banks has a better prospect of meeting or exceeding customer expectation in this
dimension compared to other dimensions.

Empathy at UB has an average score of -1.42(Table3.3.2). The bank appear to be particularly weak
in the attributes Understand the specific needs of customers and Staff giving customers personal
attention since they have a higher gap score of -2.27 and -1.82(Table3.3.2).All the scores indicates
the bank is insufficient on this dimension.

Overall, the largest quality gap found in the Empathy and Reliability dimensions with a negative
value of -1.42 and -1.048, respectively. While the other dimensions show lower perception-
expectation gap indicating the customers expectations are not met. It should be underscored that all
of them show negative gaps indicating that bank has lots of work to do in its service and to meet or
exceed customer expectation.

61
Table 3.3.2: SERVQUAL attributes score of Perception, Expectation and the gap at UB

Perceptio Expectati SERVQU

Dimensions Q Attributes n on AL Gap
Tangibility 1 Modern looking equipment 5.27 5.89 -0.62
2 Visually Appealing physical facilities 4.9 5.44 -0.54
3 Neat appearance of staff 5.45 6 -0.55
Materials associated with the service are visually
4 appealing 4.45 6.07 -1.62
5 Convenience on Location of Branches 5.18 6.17 -0.99
Average score of dimension 5.05 5.914 -0.864
Reliability 6 Staff keeping promise 4.9 4.98 -0.08
7 Sincere interest in solving customers problems 4.55 5.6 -1.05
8 Staff performing service right the first time 3.27 4.75 -1.48
9 Provide services at the time they promise to do so 3.81 5.63 -1.82
10 Insists on error free records 4.63 5.44 -0.81
Average score of dimension 4.232 5.28 -1.048
Responsivenes Staff telling customers exactly when services will
s 11 be performed 5.54 5.61 -0.07
12 Prompt service to Customers 5.55 5.7 -0.15
13 Staff willingness to help 5.45 6.36 -0.91
Staff are never be too busy to respond to
14 customers requests. 4.9 6.36 -1.46
Average score of dimension 5.1344 5.862 -0.7276
Assurance 15 Behaviors of staff instill confidence in customers 4.81 5.45 -0.64
16 Customers feel safe in their transactions 4.81 4.9 -0.09
17 Friendliness and courtesy of staff 5.27 5.54 -0.27
18 Staff having knowledge to answer questions 5.55 6.45 -0.9
Average score of dimension 5.11 5.585 -0.475
Empathy 19 Individual attention given by staff 4.63 5.09 -0.46
20 Convenient operating hours 4.63 6.27 -1.64
21 Staff giving customers personal attention 4.27 6.09 -1.82
22 Staff giving customers best interest at heart 4.27 5.18 -0.91
23 Understand the specific needs of customers 3.45 5.72 -2.27
Average score of dimension 4.25 5.67 -1.42
Unweighted Average SERVQUAL score -0.907

62
3.4 SERVQUAL Importance Ranking
The third part of the questionnaire dealt with assessing the ranking of the five dimensions of service
quality. The respondents were asked to rate each on a scale of 10 point. The following table depicts
the points given for each dimension at the three banks.

Table 3.4.1: SERVQUAL importance level of dimensions at CBE, AIB and UB with a point score

CBE AIB UB
Dimensions Average Average Average Overall
point point Score Average
score Ranking

Tangibles 8.42 8.38 7.89 8.23 4

9.17
Reliability 9.2 9.3 9 1
8.38
Responsiveness 8.95 8.41 7.79 3
8.56 2
Assurance 8.33 8.89 8.47
7.86 5
Empathy 8.15 8.05 7.39

Table 3.4.1: SERVQUAL importance level with a point score at CBE, AIB and UB

As shown on Table 3.4.1 to measure a service quality by rating the level of importance on five
dimension of service quality customers of CBE gives first priority to Reliability(9.2) followed by
Responsiveness (8.95) and Tangibles(8.42). Empathy (8.15) is given low point to evaluate a quality
service less than Assurance (8.33).

By referring the same table, the customers of AIB believe Reliability(9.3) and Assurance (8.89) are
more important. Also Responsiveness (8.41) and Tangibles (8.8) will take third and fourth
respectively. Empathy received the least score of the five dimensions.

In the case of UB, respondents ranked Reliability(9.0), Assurance (8.47) Tangibles (7.89) and
Responsiveness (7.79) in that order. Again Empathy (7.39) was ranked last. Therefore, in
determining the importance level of the dimensions Reliabilityis ranked first followed by Assurance.

63
Responsiveness and Tangibles are ranked second and third. Empathy is assumed to be least
important dimension (see Table 3.4.1 last column).

3.5. Comparative analysis of the three bank service quality

The basic objective of this study is to assess customers perception of quality service in the banking
sector by using the SERVQUAL model at selected banks in Addis Ababa. This part of the paper
presents a comparative analysis of perception-expectation gap among the three banks based on
customers survey. Table 3.5.1 depicts the overall perception-expectation. A negative value of
unweighted scores value for all bank indicates shortfall in service quality. However, the weighted
gap score of UB (-0.907) is higher than the other two banks. As it can be observed from table 3.5.1
AIB has the highest gap for the dimension Tangibles (-1.276), indicating the customers didnt get
what they expect in this dimension at AIB. Reliability dimension has the highest gap at UB (-1.048)
illustrating UB is less reliable as compared to CBE and AIB by customers.

On the other hand, Responsiveness has high gap score at AIB (-0.972), which shows CBE and UB
are more responsive for customer request with a gap score of -0.065 and -0.727 respectively. UB has
better ability to convey trust and confidence with its employees knowledge and courtesy with a low
gap score in Assurance dimension (-0.474). But AIB has higher value in this dimension (-0,795) than
CBE (-0.733). All the three banks have a higher negative score gap for Empathy dimension. With
this fact in mind UB has the highest negative gap this dimension (-1.42) followed by AIB (-1.284)
and CBE(-.0788). Form these values of Empathy; one can infer that the three banks lack caring,
individualized attention for their customers.

Also Table 3.5.2 reports the standard deviation of each dimension. Standard deviations are
significant since all the coefficients of the standard deviations are greater than 5%. This indicates that
the negative score for each dimension could potentially be even higher than the mean score shown.

64
 Table 3.5 1: A Comparison on quality Service gap at CBE, AIB and UB

CBE AIB UB
Gap Gap Gap
Dimensions Q Attributes score score score
Tangibility 1 Modern looking equipment -0.5 -1.6 -0.62
2 Visually Appealing physical facilities -0.83 -1.16 -0.54
3 Neat appearance of staff -0.94 -1.19 -0.55
4 Materials associated with the service are visually appealing -0.52 -1 -1.62
5 Convenience Location of Branches -1.2 -1.43 -0.99
Average score of dimension -0.798 -1.276
-0.864
Reliability 6 Staff keeping promise -1.45 -0.86 -0.08
7 Sincere interest in solving customers problems -0.33 -0.59 -1.05
8 Staff performing service right the first time -1.07 -1.27 -1.48
9 Provide services at the time they promise to do so -1.17 -1.3 -1.82
10 Insists on error free records -0.53 -0.89 -0.81
Average score of dimension -0.91 -0.982
-1.048
Responsiveness 11 Staff telling customers exactly when services will be performed -0.48 -0.81 -0.07
12 Prompt service to Customers -0.95 -0.81 -0.15
13 Staff willingness to help -0.7 -1.3 -0.91
14 Never be too busy to respond to customers requests. -1.73 -0.97 -1.46
-0.965 -0.973
Average score of dimension -0.728
Assurance 15 Behaviours of staff instil confidence in customers -0.68 -0.89 -0.64
16 Customers feel safe in their transactions -0.58 -0.51 -0.09
17 Friendliness and courtesy of staff -1.05 -0.76 -0.27
18 Staff having knowledge to answer questions -0.62 -1.02 -0.9
-0.733 -0.795
Average score of dimension -0.475
19 Individual attention given by staff -0.55 -1.43 -0.46
Empathy
20 Convenient operating hours -0.9 -1.06 -1.64
21 Staff giving customers personal attention -0.68 -1.13 -1.82
22 Staff giving customers best interest at heart -0.66 -1.45 -0.91
23 Understand the specific needs of customers -1.15 -1.35 -2.27

Average score of dimension -0.788 -1.284 -1.42

65
Table 3.5.2: Quality Service gap at CBE, AIB and UB with Standard deviation of the
dimensions

AIB UB
CBE Unweighted score - Unweighted score -
Unweighted score - 0.865 0.907
Dimensions 0.838
Gap(P-E) Stand Gap(P-E) Stand Gap(P-E) Stand
Devi. Devi. Devi.

Tangibility -0.798 0.29533 -1.276 0.23755 -0.864 0.461118

Reliability -0.91 0.46381 -0.98 0.30045 -1.048 0.666386

Responsiveness -0.065 0.544946 -0.972 0.230994 -0.7276 0.660827

Assurance -0.733 0.215619 -0.795 0.217639 -0.475 0.36428

Empathy -0.788 0.238893 -1.284 0.178269 -1.42 0.726739

66
 CHAPTER FOUR

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

The study revealed the customers perception toward service quality banking at the three banks.
This is an exploratory study that is limited in scope and sample size, but it can contribute to
further study on quality of the banking sector in Ethiopia context. Therefore, based on the
analysis and interpretations made at the pervious chapter the following summaries, conclusions
and recommendation are made.

4.1. Summary of Major Findings

The following findings are derived from the analysis and interpretations made in the previous
chapter.

 The demographic characteristics of respondents at the three banks show that the majority of
their respondents are male--CBE (87.5%), AIB (59.46%), & UB (78.9%). Also most of the
respondents are relatively well educated with all of them having at least a diploma.
Moreover, the results of the study reveal that the respondents have an average banking
relationship of 5 years.

 At CBE the unweighted average score is -0.8388. The dimension Tangibles has a gap score
of -0.789. The convince location of branches has the highest negative score (-1.2). The
study also reveals that CBE has relatively worrisome Reliability score as judged by the
respondents average score of -0.91 the attribute provide service at the time they promised
to do so has a gap score of -1.170.

 Responsiveness has a gap score of -0.965 among the attributes Staff are never be too busy
to respond customers request has a higher gap score -1.73. The Assurance dimension at
CBE has a score of -1.5, and the attribute friendly and courtesy of staff has a gap score of -
1.5. And the last dimension Empathy has a gap score of -0.788. And the highest service
quality gap is found for Responsiveness (9-.965) followed by Reliability (-0.91). The other
dimension more or less has a lower gap scores.

 The analysis at AIB reveals an unweighted Average SERVQUAL score of -0.8656.

Tangible has a gap score of -1.27, all the attributes in this dimension has a gap score more

67
 than -1.00. Specifically the location of the branches is not convenience (-1.43) and the bank
is lagging behind on certain infrastructures, especially on ATM which has been ranked the
most important banking service.

 Reliability has a gap score of -0.982. The attribute provide service at the time promised to
do so has the largest gap score (-1.3). On the other hand, Responsiveness has a gap score of
-0.972. Specifically staff willing to help customers has a score of -1.3. Assurance
dimension has a score of -0.79 and the attribute staff having knowledge to answer
questions has the highest negative score of -1.2.

 Among all the five dimensions, Empathy has the highest negative score with the specific
attributes giving individual attention to customers (-1.43) and understanding specific
need of customers (-1.35) to this dimension.

 While comparing the dimensions at AIB the largest negative gap score is obtained by
Empathy (-1.284). Next to Empathy Tangibles and Reliability have a gap score of -1.27 and
-0.982 respectively.

 The unweighted SERVQUAL score at UB is -0.907. Tangible as one dimensions of service

quality has a gap score of -0.864, expect for the attribute materials associated with the
service are visually appealing which has a score of -1.62, the other attributes have lower
gap scores.

 Reliability has a gap score of -1.04, the attribute in this dimension provide services at the
time they promise to do so has score of -1.82. Also the staff performing service right at
first time attribute scored -1.48.

 Responsiveness has a gap score of -0.727 and the attribute Staff never be too busy to
respond to customers request has a higher score of -1.46. Empathy has the highest gap
score of -1.42 of the entire dimension.

 According to the analysis, while comparing the five dimensions at UB, the highest negative
gap of customers perception-expectation is scored by Empathy (-1.42) followed by
Reliability (-1.0480) and Tangibles (-0.864). Responsiveness (0.728) and Assurance (-0.475)
have lower scores respectively.

 Respondents have ranked the overall importance level of the five dimensions in determining
a quality banking service. Thus, according to the point score by each dimensions Reliability

68
 is rated the most important dimension at the three banks in determining a quality banking
service Also Assurance and Responsiveness will take the second and third position.
Tangibles and Empathy are assumed to be least important in determining quality banking
service.

 UB has the highest unweighted gap score of -0.907 when compared with the other two
banks. Also AIB has the second largest average SERVQUAL unweighted score of -0.8656
as compared to CBE which has a gap score of -0.8387. Standard deviations are significant
since all the coefficients of the standard deviations are greater than 5%.

4.2. Conclusions
Based on analysis of the data and findings the following conclusions are drawn:
 At CBE the unweighted SERVQUAL average score is -0.8388 indicating that the
customers expectations are not met. The Reliability dimension is worrisome with a gap
score of -0.91 indicating that the bank is not able to provide consistent service. Tangibles
dimension has a gap score of -0.789 in which the attribute the convenience location of
branches has the highest negative score (-1.2) suggesting that the location of the
branches are not convenient to customers. The other dimension with large negative score
is Assurance (-1.5) which indicates that staff may not be friendly and knowledgeable.
 At AIB the overall unweighted score is -0.8656 indicating that the customers are not
satisfied with the banking service. Empathy has the highest negative score at AIB which
suggests that the staffs are not perceived as providing caring, individual attention to
customers and understanding specific need of customers. The Tangibles with the score of
-1.276 indicates that the customers are not impressed with the physical facilities of the
bank. Also the Reliability of the bank is low with a gap score of -0.982.
 The unweighted average SERVQUAL score at UB is -0.907 showing the bank is not
providing a wished for banking service to the customers. Empathy has the highest
negative gap score of -1.42 demonstrating that UB has some deficiencies in this
dimension. The Reliability dimension also has a gap score of -1.048 showing that the
customers do not perceive the banks service to be consistent. Compared to the other
dimensions the assurance dimension at UB is considered to be relatively better, even
thought it has a negative score.
 The study demonstrates that the unweighted SERVQUAL scores of the three banks are
negative and the high standard deviation for each dimension/ attributes indicates that the

69
 negative scores for each dimension/attributes could potentially be even higher. All these
indicate that the banks are not able to meet customers expectation or the customers are
not satisfied with the banks service at the banks.

 Reliability is rated to be the most important dimension in determining a quality banking

service, while comparing the relative importance of dimensions. Assurance and
Responsiveness will take second and third rank. Tangibles being the fourth and Empathy
is assumed to be least important in determining quality banking service.

 While comparing the unweighted scores of the three banks, UB has the highest gap score
of -0.907 showing relatively poorer performance. AIB has the second highest gap score
indicating that the customers expectations are not met. Even though it has a negative
gap score for the all dimensions, CBE has a better service quality as compared to the
other two banks in this study.
 It is interesting to note that customers rated empathy dimension as the least important. At
the same time, empathy has received the highest negative gap score. This could to due to
the fact that management do not pay much attention to this dimension realizing that this
is not very important to customers.

4.3 Recommendations

With the recent establishment of several new banks in Ethiopia, the banking industry in the
country is undergoing dynamic expansion. It is, therefore, imperative for private banks to
continuously monitor their level of service delivery, changing customer profiles and the drivers
of satisfaction in order to retain their current customers and also to attract new ones. Based on
this fact and the findings of this study the following recommendations are proposed to help
improve service quality at the three banks.

A. Recommendations for three banks

Since the unweighted SERVQUAL scores for the three banks show a negative gap in all
dimensions implying that the customers perceptions falls short of their expectations the banks
should strive promptly to close these gaps by identifying the caus.
In order to close these gaps the banks should consider the following steps with regard to their
staff and management:

70
 a. Recruitment and selection of qualified staff is vital in order to deliver quality
service. Thus, the banks should make the process by considering not only the
technical qualification of the applicant but also his/her soft skills like personality and
attitude in interacting with customers. Training is considered to be essential for
improving quality and. Therefore, the banks should develop training programs to
improve the Staff skill, friendliness and courtesy.
b. Also effective teamwork tends to develop capabilities for delivering a high level of
service quality, since working as a mutually reinforcing team creates an environment
where customer satisfaction can be increased and employee motivation sustained.
c. Empowerment of front-line staff could be fundamental to achieving and improving
the level of service quality. Therefore, the banks should empower front-line workers
to address customers concerns.
d. Introducing improved communication flow would enable staff to deliver what
customers expect more promptly and to provide information to management about
customers expectations so that necessary changes would be made.
e. Managements commitment to quality improvement is crucial since management is
primary driver for quality improvement initiatives.

In addition to the recommendations forwarded above, the banks should also consider the
following points to improve the quality of their banking service.

 One way to increase competency and customer retention is through maintaining a good
management information system by gathering as much pertinent information as
necessary about the customers and their expectations.
 The banks must strive to acquire technological capacity that will enable them to provide
a wide array of banking service promptly and efficiently to their customers.
 Banks may reconsider their banking service hours and install ATMs at various locations
To provide round the clock access to customers.

B. Recommendations for CBE

 Based on the survey result, the CBE should work to improve the Tangibles. A special
emphasis should be given to convenience of bank location (i.e. close to customers
home/work) to enhance overall accessibility.

71
 In order to close the gap on the Reliability dimension the bank must clearly state what
customers will actually receive and when. Then they must make sure that the promised
services are delivered. Also training employees to identify and improve their attitudes
towards meeting customers expectation is paramount. These training programs must
emphasis meeting customer expectations.
 The willingness to help customers and to provide prompt service should be improved by
giving continuous training to staff with relation to Responsiveness dimension. The bank
should minimize the gap in this area by improving Responsiveness to customer requests,
questions, complaints and problems and by recruiting qualified staff.
 The bank should work hard on relationship marketing to improve the customer service
skill of employees including, caring for the customers and giving individualized
attention to customers. Providing proper training in this area is critical as well.

C. Recommendations for AIB

 AIB should make the necessary investments to improve its Tangibles such as, the
appearance of the companys physical facilities and updating its equipment. The bank
should also locate its branches at sites that are convenient to customers.
 To close the gap of the most important dimension in service operation i.e. Reliability, the
bank should train its employees to be consistent in providing service.
 To improve the Responsiveness dimension of AIBs service quality and to narrow the
gap between perceptions and expectations, a training initiative should be made focusing
on fast response from employees to customers' requests, fast redressal of complaints,
prompt service from the employees, and willingness of the employees to help customers.
 The banks should attempt to remain competitive by providing attractive and prompt
banking service that earns by customers confidence and trust.

D. Recommendations for UB
 UB should improve the Tangible dimension of its service by improving the banks
physical appearance, acquiring modem equipments like computers communication
materials, good waiting facility inside the bank, neatly dressed and good appearance of
the employees and convenient location of the branches for customers.

72
 UB should work hard at Empathy dimension. This can be done by improving the skill of
staff related to; understanding the specific needs of customers and giving individual
attention to customers by giving trainings in this area. Also UB should improve
convenient operating hours to customers by considering lunch hours.
 As compared to the three banks UB has the lower SERVQUAL gap. But the banks
should strive to keep its position by improving its service quality since the banking
sector in Ethiopia is becoming full competition with introduction of new banks.
 As noted in the conclusion section above, it is interesting to note that customers rated
empathy dimension as the least important. At the same time, empathy has received the
highest negative gap score at the three banks. This could to due to the fact that
management do not pay much attention to this dimension realizing that this is not very
important to customers. Thus, this issue needs further and detail study to discover the
real causes for this contradiction.

73
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 Kumar, M.,Kee T.& Charles V.( 2010) Comparative Evaluation of Critical Factors in
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Management Vol. 27 No. 3, pp. 351-377
 Kumar, M.,T.Kee & T. Manshor, (2009), Determining the relative importance of
critical factors in delivering service quality of banks application of dominance analysis
in SERVQUAL model., journal of Managing Service Quality ,Vol.19 No.2,.pp 211-228
 Mersha, T. & V. Adlakha ,(1992) Attirbutes of Service Quality: The Consumers
Perspective International Journal of Service Industry Management, Vol. 3 No3,pp34-
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 Addis Ababa University
Faculty of Business and Economics
MBA (Master of Business Administration) Program

Yonatan Gebre

Tel: 0911 10 95 44

1-7

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2 3 .
4 ( )
5 6 .
7 ( ) .

1 2 3 4 5 6 7

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2.
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5
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77
 5 10

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78
 Table 2.1 Summary of Past research works on Quality Service (in
Banks and related areas)
Research Title and Author(s)
Comparative evaluation of
critical factors in delivering
service quality of banks:
An application of dominance
analysis in
modified SERVQUAL model
Authors M. Kumar, T. Kee &
S. Peru (2009) International
Journal of Quality &
Reliability Management
Vol. 27 No. 3, 2010
pp. 351-377
Service quality: implications
for management
development
Authors Atul Gupta and Injazz
Chen, International Journal of
Quality
& Reliability Management,
Vol. 12 No. 7, 1995, pp. 28-35,
Service quality measurement
in the banking sector in south
Korea
Authors Charles Chi Cui,
Barbara R. Lewis & Won Park
International Journal of Bank
Marketing Vol. 24 No.
4(2003),p191-201
Research Objective Methods used Result
This study aims to find the The sample is made up of 308 bank customers, The results rev
differences in the service quality consisting of the customers from both Islamic and competence and
(if any) between two types of conventional banks from different parts of different between
banks, namely conventional and Malaysia. The data have been collected by using banks, whereas th
Islamic, in terms of common the structured questionnaire, which consists of convenience are f
critical factors after re-examining three parts. Part 1 deals with consumers usage of between these t
the SERVQUAL model, banking channels and their banking behavior. Part of dominance ana
originally pioneered by 2 contains 26 statements related to service quality indicates that the
Parasuraman. Further, the dimensions based on SERVQUAL model. Finally, of banks is in term
technique of dominance Part 3 contains the questions related to the socio- Competence and
analysis is used to examine the demographic profiles of respondents. relatively more d
relative importance of the critical types of banks. Th
factors in closing up the overall help to reduce the
service quality gap in these two extent of 72 perc
types of banks. banks and 85 per
This study attempts to define SERVQUAL was used to collect data for all the A striking resul
perceived service quality, relate three types of services: a fast food restaurant for dimensions is
the concepts of perceived service pure service, an airline for mixed service, and a relationship betwe
quality and its five dimensions in long distance telephone company for quasi- reliability for al
service operations, and the manufacturing service. A SERVQUAL Reliability is the
implications of the relation questionnaire was given to 110 consumers for determining servi
between service quality and its each of the three services. Of the 110 of services. Tangi
dimensions on management questionnaires distributed, In addition to the 22 variable for the m
development. items on SERVQUAL, the respondents were Empathy is cri
asked to rate the overall quality of service manufacturing se
operations on a seven-point Likert scale. We used individualized at
a seven-point Likert scale instead of a four-point perceived satisfac
one as used by Parasuraman et al. because it will
give a better normal spread of observations.
The first finding i
The purpose of this study is to A convenience sample was used to the study. original SERV
test the applicability of From the potential respondents, total of 153 SERVQUAL sug
alternative measurement useable questionnaires were returned from scales cannot be u
approaches i.e SERVQUAL banking customers. In order to measure the service customization is p
Parasuraman et al.,1985,1991), quality in South Korea the SERVQUAL and The second findin
SERVPERF, weighted SERVPERF (Cronin and Taylor 1992, suggests that the f
SERQUAL, and weighted Parasuraman et al.,1985,199) is used. cultural consisten
SERVPERF(Cronin and Taylor the other hand
1992) in the context of the indicate that the S
banking sector in South Korea. SERVQUAL wh
though it is no
applicability of SE
79

Determining the relative
importance of critical factors
in delivering service quality
of banks
Author : An application of
dominance analysis in
SERVQUAL model
- Authors Mukesh Kumar,
Fong
Tat Kee and Amat Taap
Manshor journal of
Managing Service Quality
,Vol.19 No.2,2009.pp 211-
228
Attributes of Service Quality:
Consumers Perspective
Author: Tigineh Mersha and
Veena Abdlakha International
Journal of Service Industry
Management, Vol. 3 of good and poor quality service. The
No3,1992,pp3425.
The purpose of this paper is to
determine the critical factors to
accessing the level of service
quality of banks by re-examining
the SERVQUAL model,
originally pioneered by
Parasuraman. Further, the
technique of dominance analysis
is used to measure the relative
importance of each critical factor
in closing up overall service
quality gap of banks.
The purpose of the study is to
identify and rank attributes of
good and poor quality from
customers perspective.
80
SERVQUAL in s
with farther resear
The sample consists of 308 bank customers from The results rev
different parts of Malaysia and data were collected differences betwe
by using a structured questionnaire, which consists and their perceptio
of three parts. Part 1 deals with consumers usage Among the four d
of banking channels and their banking behavior. the smallest gap
Part 2 contains 26 statements related to service largest gap. The a
quality dimensions based on SERVQUAL model. indicates that
Finally, Part 3 part deals socio-demographic together can help
profiles.. The descriptive statistics have been used as much as 76 pe
to find out the mean and standard deviation of to become mor
each SERVQUAL statement on both perception as responsive and
well as expectation. On the other hand, the factor customers and p
analysis technique has been used to extract more conveniently
relevant dimensions from the 26 statements on
service-quality.
A list of quality attributes was first obtained using The finding indi
a modified Delphi method with 25 MBA students good service qual
enrolled in a graduate Service Operation 2)thoroughness/ac
Management class as Delphi experts. And the 3)consistency/reli
final survey questionnaire including 12 attributes willingness to cor
service. And the m
questionnaires were distributed to around 316 for service quality we
university graduate students of a university located the service; (2) em
in a large metropolitan area. The participants were care attitude; (3)
asked to list attributes they considered important service inconsiste
for good and poor quality of service, and also to high cost. The r
add any other attributes which did not appear in have well-
the list. Five service sectors were selected for this Attributes that r
purpose namely -Physician services, retail good quality for
banking, auto maintenance, colleges/universities. ranking for in
Willingness to c
correct error rank
the study indicate
between cost an
underscore the im
determining cus
service.